Countervailing power revisited

Abstract

The paper uses the Nash bargaining concept to study the predictions of the theory of countervailing power within two theoretical models, a Cournot model and a model of perfect competition. Within the Cournot model a decrease in the number of retailers unambiguously leads to an increase in equilibrium consumer prices. In the model of perfect competition the reverse is true. One may thus conclude that countervailing power can have positive effects for the consumers only if competiton at the retail level is very fierce.