IDEAS home Printed from https://ideas.repec.org/a/jec/journl/v10y2014i1p1-26.html
   My bibliography  Save this article

On Marketing Channel Structures and Quality Choices

Author

Listed:
  • Wei-Wei Lee

    (Department of Economics, National Dong Hwa University, Taiwan)

  • Bo-Tai Tzeng

    (Center of General Education, Min-Hwei College of Health Care Management, Taiwan)

Abstract

This study applies the vertical differentiation model to issues of channel choice. The primary goal is to examine how channel structures may influence a firm's strategies and consumer welfare. Because our concerns are more about coordination rather than competition, the effects of strategic interaction are dominated by the two manufacturers and one retailer channel configuration. We observe that the decentralized firm has incentives to extend the degree of quality differentiation to relax price competition. Moreover, retail price and quality move in the same direction. We also find that the consumer's surplus, producer's surplus and social welfare are the largest when both manufacturers are integrated, but the smallest when both manufacturers are decentralized.

Suggested Citation

  • Wei-Wei Lee & Bo-Tai Tzeng, 2014. "On Marketing Channel Structures and Quality Choices," Journal of Economics and Management, College of Business, Feng Chia University, Taiwan, vol. 10(1), pages 1-26, January.
    • Handle: RePEc:jec:journl:v:10:y:2014:i:1:p:1-26
    as

    Download full text from publisher

    File URL: http://www.jem.org.tw/content/pdf/Vol.10No.1/01.pdf
    Download Restriction: no
    File URL: http://www.jem.org.tw/content/abstract/Vol.10No.1/English/01.htm
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Anne T. Coughlan & Birger Wernerfelt, 1989. "On Credible Delegation by Oligopolists: A Discussion of Distribution Channel Management," Management Science, INFORMS, vol. 35(2), pages 226-239, February.
    2. Motta, Massimo, 1993. "Endogenous Quality Choice: Price vs. Quantity Competition," Journal of Industrial Economics, Wiley Blackwell, vol. 41(2), pages 113-131, June.
    3. S. Chan Choi, 1991. "Price Competition in a Channel Structure with a Common Retailer," Marketing Science, INFORMS, vol. 10(4), pages 271-296.
    4. Joseph J. Spengler, 1950. "Vertical Integration and Antitrust Policy," Journal of Political Economy, University of Chicago Press, vol. 58(4), pages 347-347.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Vincent R. Nijs & Kanishka Misra & Karsten Hansen, 2014. "Outsourcing Retail Pricing to a Category Captain: The Role of Information Firewalls," Marketing Science, INFORMS, vol. 33(1), pages 66-81, January.
    2. Huang, Qinghua & Yang, Shilei & Shi, Victor & Zhang, Yibin, 2018. "Strategic decentralization under sequential channel structure and quality choices," International Journal of Production Economics, Elsevier, vol. 206(C), pages 70-78.
    3. Donna, Javier D. & Pereira, Pedro & Trindade, Andre & Yoshida, Renan C., 2020. "Direct-to-Consumer Sales by Manufacturers and Bargaining," MPRA Paper 105773, University Library of Munich, Germany.
    4. Sumit Raut & Sanjeev Swami & Eunkyu Lee & Charles B. Weinberg, 2008. "How Complex Do Movie Channel Contracts Need to Be?," Marketing Science, INFORMS, vol. 27(4), pages 627-641, 07-08.
    5. Deyan Yang & Jinyong Wang & Dongping Song, 2019. "Channel Structure Strategies of Supply Chains with Varying Green Cost and Governmental Interventions," Sustainability, MDPI, vol. 12(1), pages 1-26, December.
    6. Chan, Tat Y. & Narasimhan, Chakravarthi & Yoon, Yeujun, 2017. "Advertising and price competition in a manufacturer-retailer channel," International Journal of Research in Marketing, Elsevier, vol. 34(3), pages 694-716.
    7. Yao, Z. & Leung, Stephen C.H. & Lai, K.K., 2008. "Analysis of the impact of price-sensitivity factors on the returns policy in coordinating supply chain," European Journal of Operational Research, Elsevier, vol. 187(1), pages 275-282, May.
    8. Cao, Qingning & Geng, Xianjun & Zhang, Jun, 2015. "Strategic Role of Retailer Bundling in a Distribution Channel," Journal of Retailing, Elsevier, vol. 91(1), pages 50-67.
    9. Vrinda Kadiyali & Pradeep Chintagunta & Naufel Vilcassim, 2000. "Manufacturer-Retailer Channel Interactions and Implications for Channel Power: An Empirical Investigation of Pricing in a Local Market," Marketing Science, INFORMS, vol. 19(2), pages 127-148, September.
    10. Jin, Yannan & Wu, Xiaole & Hu, Qiying, 2017. "Interaction between channel strategy and store brand decisions," European Journal of Operational Research, Elsevier, vol. 256(3), pages 911-923.
    11. Xuan Zhao & Derek Atkins & Yong Liu, 2009. "Effects of distribution channel structure in markets with vertically differentiated products," Quantitative Marketing and Economics (QME), Springer, vol. 7(4), pages 377-397, December.
    12. Noah Lim & Teck-Hua Ho, 2007. "Designing Price Contracts for Boundedly Rational Customers: Does the Number of Blocks Matter?," Marketing Science, INFORMS, vol. 26(3), pages 312-326, 05-06.
    13. Dridi, Dhouha & Ben Youssef, Slim, 2015. "Local advertising externalities and cooperation in one manufacturer-two retailers channel with exogenous marginal profits," MPRA Paper 62697, University Library of Munich, Germany.
    14. Luo, Zheng & Chen, Xu & Chen, Jing & Wang, Xiaojun, 2017. "Optimal pricing policies for differentiated brands under different supply chain power structures," European Journal of Operational Research, Elsevier, vol. 259(2), pages 437-451.
    15. Minakshi Trivedi, 1998. "Distribution Channels: An Extension of Exclusive Retailership," Management Science, INFORMS, vol. 44(7), pages 896-909, July.
    16. Matsui, Kenji, 2019. "A supply chain member should set its margin later if another member's cost is highly uncertain," European Journal of Operational Research, Elsevier, vol. 275(1), pages 127-138.
    17. Messinger, Paul R., 2016. "The role of fairness in competitive supply chain relationships: An experimental studyAuthor-Name: Choi, Sungchul," European Journal of Operational Research, Elsevier, vol. 251(3), pages 798-813.
    18. Pranab Majumder & Ashok Srinivasan, 2008. "Leadership and Competition in Network Supply Chains," Management Science, INFORMS, vol. 54(6), pages 1189-1204, June.
    19. Yunchuan Liu & Rajeev K. Tyagi, 2011. "The Benefits of Competitive Upward Channel Decentralization," Management Science, INFORMS, vol. 57(4), pages 741-751, April.
    20. Wu, Chongqi & Mallik, Suman, 2005. "Channel Structure, Cross Sales, and Vertical Integration in a Multi-channel Distribution System," Working Papers 05-0127, University of Illinois at Urbana-Champaign, College of Business.

    More about this item

    Keywords

    marketing channel; vertical differentiation; integration; decentralization;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:jec:journl:v:10:y:2014:i:1:p:1-26. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Yi-Ju Su (email available below). General contact details of provider: https://edirc.repec.org/data/cbfcutw.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.