Entry and Product Variety with Competing Supply Chains

Matteo Bassi (), Marco Pagnozzi and Salvatore Piccolo ()
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Matteo Bassi: Università di Napoli Federico II and CSEF

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: We study a supply chain model where competing manufacturers located around a circle contract with privately informed and exclusive retailers. The number of brands in the market (determined by the manufacturers’ zero profit condition) depends on the level of asymmetric information within supply chains and on the types of contracts between manufacturers and retailers. With two-part tariffs, wholesale prices fully reflect retailers’ costs. With linear contracts, wholesale prices are constant and independent of retailers’ costs. The number of brands is lower (resp. higher) with asymmetric information than with complete information when contracts are linear (resp. with two-part tariffs). Moreover, the number of brands is always higher with linear contracts than with two-part tari¤s. We also analyze the effects of endogenous entry on welfare.

Keywords: Product Variety; Entry; Competing Supply Chains; Vertical Contracting; Asymmetric Information (search for similar items in EconPapers)
JEL-codes: D43 D82 L13 L51 (search for similar items in EconPapers)
Date: 2013-10-10
New Economics Papers: this item is included in nep-com, nep-cta, nep-ind, nep-ipr, nep-pr~ and nep-mic
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Citations: View citations in EconPapers (2)

Forthcoming in Journal of Industrial Economics

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Journal Article: Entry and Product Variety with Competing Supply Chains (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:sef:csefwp:343

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