Which is better for durable goods producers, exclusive or open supply chain?

Hiroshi Kitamura, Noriaki Matsushima and Misato Sato

ISER Discussion Paper from Institute of Social and Economic Research, The University of Osaka

Abstract: We explore the supply chain problem of a downstream durable goods monopolist, who chooses one of the following trading modes: an exclusive supply chain with an incumbent supplier or an open supply chain, allowing the monopolist to trade with a new efficient entrant in the future. The expected retail price reduction in the future dampens the profitability of the original firms. An efficient entrant's entry magnifies such a price reduction, causing a further reduction of original firms' joint profits. In equilibrium, the downstream monopolist chooses the exclusive supply chain to escape further price reductions, although it expects efficient entry.

Date: 2021-01
New Economics Papers: this item is included in nep-com, nep-mic and nep-reg
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Journal Article: Which is better for durable goods producers, exclusive or open supply chain? (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:dpr:wpaper:1115

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