The paradox of bargaining power in the supply chain: negotiations in markets of differentiable products.

This paper presents a bargaining model for B2B supply chains where multiple manufacturers sell differentiated products to a dominant monopsonistic retailer. We examine how negotiation structure, sequential versus simultaneous, and demand disruptions affect supplier profitability. Surprisingly, limited bargaining power can yield higher profits, particularly in simultaneous negotiations. In sequential settings, manufacturers achieve greater profits despite increased competition. The only case where maximum bargaining power is optimal is under a monopolistic supplier setting with sequential bargaining. These findings offer strategic insights for suppliers, especially in concentrated retail markets like Israel’s, highlighting when restraint, not dominance, leads to better outcomes.