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How Strong Is Your Firm’s Competitive Advantage? by Daniel Marburger

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Chapter 6

When the Buyer Holds Six Aces

The Bargaining Power of Buyers

In Chapter 5, we laid out a hypothetical scenario in which Rick hoped to find someone to mow his lawn so he could go to the office. A teenager in his neighborhood, Billy, usually gets $10/hour performing odd jobs for his neighbors. It would take him two hours to mow Rick’s lawn, so if he mows Rick’s lawn, he misses out on a chance to make $20 working for other neighbors. Therefore, his minimum price is $20. Rick is perfectly capable of mowing his own lawn, and could complete the task in an hour. However, he would rather have Billy do it because it will free him up to go to the office and bill clients at a rate of $150. Consequently, Rick would be willing to spend up to ...

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