Benefits of Channel Discord in the Sale of Durable Goods

Anil Arya () and Brian Mittendorf ()
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Anil Arya: Ohio State University, Columbus, Ohio 43210-1144
Brian Mittendorf: Yale School of Management, New Haven, Connecticut 06520-8200

Marketing Science, 2006, vol. 25, issue 1, 91-96

Abstract: Minimizing strife through vertical integration is commonly seen as the “holy grail” for long-term success in product distribution. In this paper, we take a different slant, showing that sometimes a separated channel that embodies a degree of discord can be helpful, particularly when a long-term view is taken. This result is shown in the context of durable goods manufacturing. The quandary of durable goods production is that once demand for a certain time frame is met, there is a subsequent temptation to flood the market with additional goods. As such, consumers are reluctant to buy immediately, instead opting to wait for discounted prices. This problem can be alleviated by a degree of channel discord: High wholesale prices ensure future sales will slow to a trickle.

Keywords: channel coordination; double marginalization; durable goods (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (32)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormksc:v:25:y:2006:i:1:p:91-96

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