Your supplier could get smart and protect itself from chaos by adopting most-favored-customer agreements. Under these agreements you promise a customer that you will never sell to him for a price more than what you sell to any other customer for.
If a supplier gave all of his customers most-favored-customer status, it would be much harder for him to secretly lower his prices, because he would have to lower prices for all customers if he did so for just a few. He wouldn’t be able to offer lower prices to just those customers he was trying to steal from his rival. Furthermore, it’s much easier to determine if a firm is giving discounts to all its customers rather than if it is just cutting prices for some. When one supplier issues most-favored-customer agreements, therefore, its rival can have much more confidence that it is not being betrayed. So, even though most-favored-customer agreements sound like they favor customers, they can really help producers by reducing price competition.
[16]Brandenburger and Nalebuff (1996), 161–169.