On Marketing Channel Structures and Quality Choices

Wei-Wei Lee and Bo-Tai Tzeng ()
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Wei-Wei Lee: Department of Economics, National Dong Hwa University, Taiwan
Bo-Tai Tzeng: Center of General Education, Min-Hwei College of Health Care Management, Taiwan

Journal of Economics and Management, 2014, vol. 10, issue 1, 1-26

Abstract: This study applies the vertical differentiation model to issues of channel choice. The primary goal is to examine how channel structures may influence a firm's strategies and consumer welfare. Because our concerns are more about coordination rather than competition, the effects of strategic interaction are dominated by the two manufacturers and one retailer channel configuration. We observe that the decentralized firm has incentives to extend the degree of quality differentiation to relax price competition. Moreover, retail price and quality move in the same direction. We also find that the consumer's surplus, producer's surplus and social welfare are the largest when both manufacturers are integrated, but the smallest when both manufacturers are decentralized.

Keywords: marketing channel; vertical differentiation; integration; decentralization (search for similar items in EconPapers)
JEL-codes: C70 D4 L13 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:jec:journl:v:10:y:2014:i:1:p:1-26

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