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Retail channel management in consumer search markets

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  • Garcia, Daniel
  • Janssen, Maarten

Abstract

We study how a monopoly manufacturer optimally manages her contractual relations with retailers in markets with consumer search. By choosing wholesale prices, the manufacturer affects the degree of competition between retailers and the incentives of consumers to search. We show that depending on whether or not the manufacturer can commit to her price decisions and on the search cost, the manufacturer may be substantially better off choosing her wholesale prices not independent of each other, consciously allowing for asymmetric contracts. Thus, our analysis may shed light on when we may expect sales across different retailers to be positively or negatively correlated. Our model may be able to generate loss leaders at the wholesale level and show the rationale for creating “premium resellers”.

Suggested Citation

  • Garcia, Daniel & Janssen, Maarten, 2018. "Retail channel management in consumer search markets," International Journal of Industrial Organization, Elsevier, vol. 58(C), pages 162-182.
    • Handle: RePEc:eee:indorg:v:58:y:2018:i:c:p:162-182
    DOI: 10.1016/j.ijindorg.2017.05.004
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    Citations

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    Cited by:

    1. Edona Reshidi, 2022. "Vertical Bargaining and Obfuscation," Staff Working Papers 22-13, Bank of Canada.
    2. Garcia, Daniel & Janssen, Maarten, 2018. "Retail channel management in consumer search markets," International Journal of Industrial Organization, Elsevier, vol. 58(C), pages 162-182.
    3. Janssen, Maarten C.W., 2020. "Vertical contracts in search markets," International Journal of Industrial Organization, Elsevier, vol. 70(C).
    4. Janssen, Maarten & Reshidi, Edona, 2018. "Retail Discrimination in Search Markets," CEPR Discussion Papers 12945, C.E.P.R. Discussion Papers.
    5. Konstantinos Charistos & Christos Constantatos & Ioannis N. Pinopoulos, 2020. "Downstream horizontal mergers and wholesale price discrimination," Economics Bulletin, AccessEcon, vol. 40(4), pages 3124-3130.
    6. Matsui, Kenji, 2018. "When and what wholesale and retail prices should be set in multi-channel supply chains?," European Journal of Operational Research, Elsevier, vol. 267(2), pages 540-554.
    7. Janssen, Maarten & Reshidi, Edona, 2022. "Regulating recommended retail prices," International Journal of Industrial Organization, Elsevier, vol. 85(C).
    8. Maarten Janssen & Edona Reshidi, 2023. "Discriminatory Trade Promotions in Consumer Search Markets," Marketing Science, INFORMS, vol. 42(2), pages 401-422, March.

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    More about this item

    Keywords

    Vertical relations; Retailer channel optimization; Consumer search;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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