Buyer and Seller Power in Vertical Structures
This paper develops a model of exchange between a single buyer and seller with simultaneous non-cooperative choices of a mark-up and a mark-down. These choices arise as optimal responses to uncertainty, if strategic and sales decisions are separate functions within the fi rm. There are multiple Pareto-ranked equilibria. In an interior equilibrium the amount traded equates marginal expenditure and marginal revenue, and the market power of each party depends on the relative slope of marginal value and marginal cost. If unit production cost is constant, the outcome is the same as in the Spengler-Stackelberg analysis of vertically related fi rms, whose assumption of upstream market power is thereby rationalized.
Based on agency theory, this study first established the relationship between CEO duality and the choice of partial acquisition. Putting agency theory, resource-based view and institutional theory together, this study further examined how some firm and institutional factors moderate this relationship. Using secondary data collected from firms listed in the two stock exchanges in China mainland, we find duality CEOs prefer partial acquisition over the other FDI entry modes, and this preference may be changed by firm resources, such as firm size and firm international experience, and institutional factors, such as formal institutional distance.