THE EFFECT OF VERTICAL INTEGRATION IN THE QUALITY OF DISPOSABLE PRODUCTSMarcos Singer () and Patricio Carlos Donoso () Abante, 2001, vol. 4, issue 2, pages 133-155 Abstract: This paper studies a single-product distribution channel where a manufacturer produces goods, some of which are defective, and a retailer, detecting only a subset of the defective goods, passes the rest along to customers, who end up discarding them. Conjecturing the structure of the demand and cost functions that assume customers to have a decreasing marginal aversion to bad quality while both the supplier and the retailer make marginally increasing efforts to avoid bad quality, we deduce several implicit parameters, including quality cost, based on observable data, such as the share of the channel margin. Once all the parameters of the model are available, we analyze the result of vertical integration. We not only confirm the well-known fact that vertical integration improves the quality perceived by the customer, but also characterize the attitude of the supplier, who may or may not provide a better service, in terms of the sum and the difference of logarithms of the margins. Keywords: Supply Chain; Quality; Vertical Integration; Nash Equilibrium (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: http://EconPapers.repec.org/RePEc:pch:abante:v:4:y:2001:i:2:p:133-155 Ordering information: This journal article can be ordered from Access Statistics for this article Abante is edited by Eduardo Walker More articles in Abante from Escuela de Administracion. Pontificia Universidad Católica de Chile. |
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