Product Design and Decision Rights in Vertical Structures

Pierre Dubois and Bruno Jullien

No 16-730, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: The paper argues that the emergence of private labels can be partially explained by the new information technologies available at the retail level. In our approach, the owner of a brand has ìdecision rightsîon product design, while the details of the production and distribution are left to contractual negotiation. Manufacturers have privileged information about the cost of improving quality, while distributors have private information on the impact of quality on demand. We show that ownership of the brand should be allocated to the party with a relative informational advantage. In particular, if the information of the distributor improves due to a technological shock on data collection and information management, it may become optimal for the distributor to introduce its own brand, rather than to distribute a manufacturerís brand.

Keywords: store brand; private label; asymmetric information; vertical structures; product design; decision rights (search for similar items in EconPapers)
Date: 2016-11
New Economics Papers: this item is included in nep-cta, nep-ind and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Product design and decision rights in vertical structures (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:4832

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