An industry's buyers have high bargaining power when
A) buyers purchase in large quantities.
B) switching costs are low.
C) it is economically feasible for buyers to purchase inputs from several companies at once.
D) buyers can threaten to enter an industry and produce the product themselves.
E) all of these.

Question

Quizplus · Accepted Answer

All of the options, (A) buyers purchasing in large quantities, (B) low switching costs, (C) economically feasible for buyers to purchase inputs from several companies at once, and (D) buyers can threaten to enter an industry and produce the product themselves, indicate that buyers have high bargaining power over the industry. When buyers purchase in large quantities, they have the power to negotiate lower prices from suppliers. Low switching costs also give buyers the ability to easily switch to another supplier, which puts pressure on the current supplier to keep prices competitive. When it is economically feasible for buyers to purchase inputs from several companies at once, suppliers have to compete with each other on price and quality. Lastly, if buyers can threaten to enter an industry and produce the product themselves, suppliers have to keep prices low to prevent losing business to the buyers who could produce the same product at a lower cost.

An Industry's Buyers Have High Bargaining Power When