Retailer's Product Line Choice with Manufacturer's Multichannel Marketing

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract This paper studies how a retailer decides the length of product line in a vertically related industry. We study a market with two product varieties. Each retailer decides the number of varieties it procures from an upstream manufacturer. The manufacturer may open an online store and encroach on the resale market. In the case of a monopoly retailer, anticipating the online store's encroachment, the retailer may be willing to shorten its product line, although it can choose a full-length one. In the case of duopoly retailers, on the other hand, retailers may make their product lines completely overlapped, partially overlapped, or non-overlapped. Moreover, the total surplus may decrease due to the efficiency loss in the online channel, although the competition in the resale market becomes more intense. Terms of use: Documents in EconStor may

Supplier Encroachment and Consumer Welfare: Upstream Firm's Opportunism and Multichannel Distribution

“…Moreover, the manufacturer pays higher transportation costs to ship directly to consumers, whereas the brick-and-mortar retailers do not need to do this (Li et al, 2015). When the manufacturer utilizes an online store to sell directly, it must risk returns and redress because consumers cannot physically inspect products before ordering (Pan, 2016). This assumption is also standard in the literature in that the manufacturer acts as an entrant and is thus less efficient than the incumbent retailers.…”

A Manufacturer's Incentive to Open its Direct Channel and its Impact on Welfare

“…On the contrary, when c <ĉ, the second term must be positive. 9 Therefore, whether U encroaches is decided by U's bargaining power, which is summarized in Proposition 1.…”

“…Moreover, the latter incur higher transportation costs by shipping directly to consumers, whereas the former benefit from bulk shipping(Li et al, 2015). Further, the latter must risk returns and redress because consumers cannot physically inspect products before ordering(Pan, 2016) 7. If they compete in heterogeneous products, U would have a stronger incentive to encroach because it would enjoy an market expansion effect by doing so.…”