"Buyer Countervailing Power versus Monopoly Power: Evidence from 
Experimental Posted-Offer Markets"
	
Jim Engle-Warnick
Nuffield College, Oxford OX1 1NF, UK.

and

Bradley Ruffle
Economics Department, Ben-Gurion University, UK
	

Abstract: Although much research has been devoted to the impact
of seller structure on market outcomes, considerably less is known
about the influence of buyer structure.  We examine the impact of 
buyer concentration on the pricing of a monopolist.  Markets with 
both two and four buyers achieve prices well below the monopoly price,
attaining even competitive levels - sometimes even lower.  Moreover,
markets with only two buyers show significantly lower prices than those
with four buyers.  We design an additional pair of treatments to 
pinpoint the source of this difference.  We attribute the lower prices 
in the two-buyer treatment to the monopolist pricing more cautiously 
when there are fewer buyers in order to avoid costly losses in sales. 
Buyer concentration is thus an effective source of countervailing 
power: even an unregulated monopolist that faces no possible threat of 
entry may price competitively.
	
Keywords: strategic buyer behavior, buyer concentration, monopoly,
experimental economics