When Do Large Buyers Pay Less? Experimental Evidence

The rise of mega-retailers has precipitated a growing literature on large-buyer discounts. According to Rotemberg and Saloner [1986] and Snyder [1998], large buyers' ability to obtain price discounts depends on their relative size and the degree of seller competition. I test experimentally implications of this theory concerning the number of sellers and the sizes of buyers in the market. The results track the comparative-statics predictions to a surprising extent. Subtle changes in the buyer-size distribution or number of sellers can create or negate large-buyer discounts. The results highlight the previously unexplored role of the demand structure in determining buyer-size discounts.