Buyer power in bilateral oligopolies with advance production: Experimental evidence

We conduct experiments based on the oligopoly model by Kreps and Scheinkman (1983) to assess the impact of demand side concentration on market outcomes. Both buyers and sellers in our markets are humans. The number of firms is fixed at three in all treatments. Only the number of buyers is varied and total demand is split equally among them. We observe that firms set lower prices in markets with only few buyers, namely one or two. Price dispersion is higher in markets with few buyers. Aggregate demand withholding decreases with the number of buyers. This results in lower profits for firms and higher profits for buyers in markets with few buyers.