Large buyers, preferential treatment and cartel stability

• Manel Antelo ^[2] ; Lluís Bru ^[1]
  1. [1] Universitat de les Illes Balears

     Universitat de les Illes Balears

     Palma de Mallorca, España

     
  2. [2] Universidade de Santiago de Compostela

     Universidade de Santiago de Compostela

     Santiago de Compostela, España

     
• Localización: Documentos de Traballo. Análise Económica, ISSN 1138-0713, Nº. 51, 2013, págs. 1-29
• Idioma: inglés
• Enlaces
  • Texto completo (pdf)
• Resumen

  • Bilateral deals for large clients or key account management (henceforth KAM) is traditionally justified in terms of the importance of a long-term association between a firm and such clients. However, in this paper we offer a different rationale for a seller to apply KAM to its large buyers. When facing large buyers, a firm can use KAM to deal with such buyers -but not to small individual buyers- in order to segment the market, charge higher prices to non-KAM buyers, and increase its profits. Paradoxically, the implementation of KAM by the seller makes it advantageous for customers to belong to a buyer group, thereby eliminating the instability that would otherwise plague the creation of the group. The formation of a buyer group thus ultimately depends on the pressure it puts upon the seller to resort to KAM to segment the market.