MARKET POWER AND PERFORMANCE - A CROSS-INDUSTRY ANALYSIS OF MANUFACTURERS AND RETAILERS

Two recent studies of manufacturer and retailer profitability in the f ood industry have raised questions about whether the widely cited, but empirically untested, shift of power from manufacturers to retailers has really occurred. Has the marketing community been operating under a misconception or are these studies flawed? This paper uses more comp lete measures of exercised and potential market power and a broader sa mple of industries and retail classes to address this critical questio n. Not only do our measures have strong theoretical grounding in the i ndustrial organization, finance and accounting literature, they incorp orate in them the impact of actions that have been commonly cited as i llustrations of a power shift. Our analysis of 14 consumer good indust ries shows that only a few of them exhibit a shift in market power tow ards retailers. Further this apparent shift is highly influenced by a small number of retailers within a single retail class.