Multiproduct Intermediaries

Makoto Watanabe and Jidong Zhou ()
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Makoto Watanabe: Department of Economics VU Amsterdam

No 2263, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: This paper develops a new framework for studying multiproduct intermediaries when consumers demand multiple products and face search frictions. We show that a multiproduct intermediary is profitable even when it does not improve consumer search efficiency. In its optimal product selection, it stocks high-value products exclusively to attract consumers to visit, then profits by selling non-exclusive products which are relatively cheap to buy from upstream suppliers. However, relative to the social optimum, the intermediary tends to be too big and stock too many products exclusively. As applications we use the framework to study the optimal design of a shopping mall, and the impact of direct-to-consumer sales by upstream suppliers on the retail market.

Keywords: Intermediaries; Multiproduct demand; Search; Direct-to-consumer sales; Product range; Exclusivity (search for similar items in EconPapers)
JEL-codes: D83 L42 L81 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2020-11
New Economics Papers: this item is included in nep-com and nep-mic
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Related works:
Journal Article: Multiproduct Intermediaries (2021)
Working Paper: Multiproduct Intermediaries (2021)
Working Paper: Multiproduct Intermediaries (2020)
Working Paper: Multiproduct Intermediaries (2020)
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