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Retail channel management in consumer search markets

Daniel Garcia () and Maarten Janssen

International Journal of Industrial Organization, 2018, vol. 58, issue C, 162-182

Abstract: We study how a monopoly manufacturer optimally manages her contractual relations with retailers in markets with consumer search. By choosing wholesale prices, the manufacturer affects the degree of competition between retailers and the incentives of consumers to search. We show that depending on whether or not the manufacturer can commit to her price decisions and on the search cost, the manufacturer may be substantially better off choosing her wholesale prices not independent of each other, consciously allowing for asymmetric contracts. Thus, our analysis may shed light on when we may expect sales across different retailers to be positively or negatively correlated. Our model may be able to generate loss leaders at the wholesale level and show the rationale for creating “premium resellers”.

Keywords: Vertical relations; Retailer channel optimization; Consumer search (search for similar items in EconPapers)
JEL-codes: D40 D83 L13 (search for similar items in EconPapers)
Date: 2018
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Working Paper: Retail Channel Management in Consumer Search Markets (2016) Downloads
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