Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2024-07-19
Number: 24-048/VII
Author-Name: Gianluca Antonecchia
Author-Workplace-Name: KU Leuven 
Author-Name: Ajay Bhaskarabhatla
Author-Workplace-Name: Erasmus School of Economics
Author-Name: Enrico Pennings
Author-Workplace-Name: Erasmus School of Economics
Title: Bargaining Power and Quantity Discounts to Retailers: Evidence from India’s Pharmaceutical Industry
Abstract: This paper develops a novel theory linking quantity discounts to bargaining power in scenarios where retailers, organized as a trade association, negotiate uni- form wholesale prices with suppliers. Our theory predicts that suppliers offer greater quantity discounts in regional markets where they possess relatively less bargaining power, as a counterbalance to the higher national wholesale prices negotiated by the retailer trade association. We test these predictions using detailed product-level data from the Indian pharmaceutical industry, where significant geographic variations in quantity discounts are observed. Our findings provide empirical support for the proposed theory.
Classification-JEL: L11, L42, D22
Keywords: quantity discounts, bargaining power, pharmaceuticals, India
File-URL: https://papers.tinbergen.nl/24048.pdf
File-Format: application/pdf
File-Size: 947.336 bytes
Handle: RePEc:tin:wpaper:20240048