Date Issued: 
September 1, 2002

Nodir Adilov and Peter Alexander.  

Media Bureau Staff Research Paper 2002-13 (Sept 2002) considers Raskovich's suggestion that becoming pivotal through merger worsens the merging buyers bargaining position.  Adilov (Dept. of Economics, Cornell Univ.) and Alexander (FCC Media Bureau) show that these results hold in the case where buyer bargaining power is equal across buyers but not in the case where bargaining power is asymmetric.

The authors demonstrate it is possible when there are asymmetries in bargaining power that larger buyers, including pivotal buyers, can extract greater gains from trade than smaller buyers.  They also show that this result holds even when the supplier’s value function is convex.  They therefore conclude that firms might use horizontal merger as a strategy to enhance bargaining position.