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Networks of manufacturers and retailers

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  • MAULEON, Ana
  • SEMPERE-MONERRIS, Jose
  • VANNETELBOSCH, Vincent J.

Abstract

We study the endogenous formation of networks between manufacturers of differentiated goods and multi-product retailers who interact in a successive duopoly. Joint consent is needed to establish and/or maintain a costly link between a manufacturer anda retailer. We find that only three distribution networks are stable for particular values of the degree of product differentiation and link costs: (i) the non-exclusive distribution & non-exclusive dealing network in which both retailers distribute both products is stable for intermediate degree of product differentiation and small link costs; (ii) the exclusive distribution & exclusive dealing network in which each retailer distributes a different product is stable for low degrees of product differentiation; (iii) the mixed distribution network in which one retailer distributes both products while the other retailer sells only one is stable for high degrees of product differentiation and large link costs. We show that the distribution networks that maximize social welfare are not necessarily stable. Thus, a conflict between stability and social welfare is likely to occur, even more if the degree of product differentiation is either low or high.

Suggested Citation

  • MAULEON, Ana & SEMPERE-MONERRIS, Jose & VANNETELBOSCH, Vincent J., 2005. "Networks of manufacturers and retailers," LIDAM Discussion Papers CORE 2005041, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2005041
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    Cited by:

    1. Jean-François Caulier & Ana Mauleon & Vincent Vannetelbosch, 2013. "Contractually stable networks," International Journal of Game Theory, Springer;Game Theory Society, vol. 42(2), pages 483-499, May.
    2. Bedayo, Mikel & Mauleon, Ana & Vannetelbosch, Vincent, 2016. "Bargaining in endogenous trading networks," Mathematical Social Sciences, Elsevier, vol. 80(C), pages 70-82.
    3. BEDAYO, Mikel & MAULEON, Ana & VANNETELBOSCH, Vincent, 2012. "Bargaining and delay in trading networks," LIDAM Discussion Papers CORE 2012046, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    4. repec:hal:wpaper:hal-00633611 is not listed on IDEAS
    5. Hemant Patil, 2011. "Buyer–seller networks with demand shocks and intermediation," Review of Economic Design, Springer;Society for Economic Design, vol. 15(2), pages 121-145, June.
    6. Chrysovalantou Milliou & Joel Sandonis, 2018. "Manufacturer Mergers and Product Variety in Vertically Related Markets," Journal of Industry, Competition and Trade, Springer, vol. 18(1), pages 1-24, March.
    7. Jean-François Caulier & Ana Mauleon & Jose Sempere-Monerris & Vincent Vannetelbosch, 2013. "Stable and efficient coalitional networks," Review of Economic Design, Springer;Society for Economic Design, vol. 17(4), pages 249-271, December.
    8. Priazhkina, Sofia & Page, Frank H., 2018. "Sharing market access in buyer–seller networks," Journal of Economic Theory, Elsevier, vol. 175(C), pages 415-446.
    9. Barna Bakó, 2016. "Exclusive contracts with private information in successive differentiated oligopolies," European Journal of Law and Economics, Springer, vol. 42(3), pages 539-546, December.
    10. Ramon Fauli‐Oller & Joel Sandonís, 2021. "Buyer power, product assortment and asymmetric retail formats," Bulletin of Economic Research, Wiley Blackwell, vol. 73(2), pages 196-211, April.
    11. Angelika Endres-Fröhlich, 2022. "The Impact of Product Differentiation on the Channel Structure in a Manufacturer-Driven Supply Chain," Working Papers Dissertations 92, Paderborn University, Faculty of Business Administration and Economics.
    12. Li, Shengyu & Luo, Rong, 2020. "Non-Exclusive Dealing with Retailer Differentiation and Market Penetration," International Journal of Industrial Organization, Elsevier, vol. 70(C).

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    More about this item

    Keywords

    networks; retailers; manufacturers;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation

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