countervailing power


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countervailing power

the ability of large buyers to offset the market power of huge suppliers as in BILATERAL OLIGOPOLY. Large buyers usually have the upper hand in a vertical market chain (for example, multiple retailers buying from food manufacturers) because, unless suppliers collude (see COLLUSION), a large buyer is able to play one supplier off against another and obtain favourable discounts on bulk purchases. Provided that competition is strong in final selling markets, countervailing power can play an important role in checking monopolistic abuse.

The economist J. K. GALBRAITH uses the phrase ‘countervailing power’ in a slightly different way to refer to the growth of trade unions and consumer groups in response to the growth of large firms.

References in classic literature ?
Palfrey was capable of horse-whipping a too rash pretender to his daughter's hand; and, moreover, he had three tall sons: it was clear that a suitor would be at a disadvantage with such a family, unless travel and natural acumen had given him a countervailing power of contrivance.
'We have countervailing power if we work together hence it is important to touch base from time to time,' he said.
The weakening of unions and protections for workers has eroded traditional sources of countervailing power. Recent research has shown that firms retain significant bargaining leverage over employees, depressing wages and working conditions.
Then there is the myth that America wants to 'build' India as a countervailing power against China.
6) And in his uncompromising approach, Innis's research persistently looked for truth, most often as a way of identifying how countervailing power could be used against bias.
The absence of a countervailing power enabled Washington to launch invasions of Afghanistan in 2001 in the aftermath of 9/11 and of Iraq in 2003 without any UN sanction.
On top of that, you had countervailing power in the form of labor unions and local banks and farm cooperatives and other groups whose voice in politics counteracted and balanced the voices of big business and the big banks.
But as I have also argued before, the need exists for a countervailing power to check the Duterte administration's excesses.
"What, then," he asks, "is the answer?" In response, Reich argues that a rising new countervailing power could bring about "changes in the market rules" that could "guarantee all citizens a share in the future growth of the economy." Although it seems to us that it is more than just a "change in the rules," he says "one straightforward way to do this would be to provide all Americans, beginning the month after they turn eighteen and continuing each month thereafter, a basic minimum income.
(20) In other words, when a buyer exerts countervailing power against a supplier with market power, the overarching goal should be consumer welfare, not supplier welfare.
WBA's added scale could provide some countervailing power in its negotiations over network access and reimbursement rates, he added.