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

Hiroshi Kitamura, Noriaki Matsushima and Misato Sato

Journal of Economics & Management Strategy, 2023, vol. 32, issue 1, 158-176

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: 2023
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https://doi.org/10.1111/jems.12497

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Working Paper: Which is better for durable goods producers, exclusive or open supply chain? (2021)
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