Zusammenfassung:
This paper develops a novel theory linking quantity discounts to bargaining power in scenarios where retailers, organized as a trade association, negotiate uniform wholesale prices with suppliers. Our theory predicts that suppliers offer greater quantity discounts in regional markets where they possess relatively less bargaining power, as a counterbalance to the higher national wholesale prices negotiated by the retailer trade association. We test these predictions using detailed product-level data from the Indian pharmaceutical industry, where significant geographic variations in quantity discounts are observed. Our findings provide empirical support for the proposed theory.