Who should handle retail? Vertical contracts, customer service, and social welfare in a Chinese mobile phone market

Jia Li and Charles Moul

International Journal of Industrial Organization, 2015, vol. 39, issue C, 29-43

Abstract: Using data on mobile phone handset sales from a single retail store, we examine the impact of different retail responsibility designations and vertical contracts on seller service provision, firm profitability, and social welfare. During our sample, this store switched from retailer-managed retailing with linear pricing contracts to manufacturer-managed retailing with revenue-sharing contracts. We estimate consumer demand and manufacturer cost parameters. Demand estimates indicate a large positive shift that coincided with the vertical change, consistent with improved retail customer service. Welfare estimates suggest that consumers derived substantial surplus from the improved customer service in addition to that from lowered prices.

Keywords: Marketing channel switch; Vertical relationships; Revenue-sharing contract; Customer service; Structural models; Mobile phones (search for similar items in EconPapers)
JEL-codes: D43 L14 L63 L81 M31 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:39:y:2015:i:c:p:29-43

DOI: 10.1016/j.ijindorg.2015.01.001

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