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Networks of manufacturers and retailers

Ana Mauleon (), José Sempere-Monerris () and Vincent Vannetelbosch ()

No 2005041, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: We study the endogenous formation of networks between manufacturers of differentiated goods and multi-product retailers who interact in a successive duopoly. Joint consent is needed to establish and/or maintain a costly link between a manufacturer anda retailer. We find that only three distribution networks are stable for particular values of the degree of product differentiation and link costs: (i) the non-exclusive distribution & non-exclusive dealing network in which both retailers distribute both products is stable for intermediate degree of product differentiation and small link costs; (ii) the exclusive distribution & exclusive dealing network in which each retailer distributes a different product is stable for low degrees of product differentiation; (iii) the mixed distribution network in which one retailer distributes both products while the other retailer sells only one is stable for high degrees of product differentiation and large link costs. We show that the distribution networks that maximize social welfare are not necessarily stable. Thus, a conflict between stability and social welfare is likely to occur, even more if the degree of product differentiation is either low or high.

Keywords: networks; retailers; manufacturers (search for similar items in EconPapers)
JEL-codes: C70 L13 L20 J50 J52 (search for similar items in EconPapers)
Date: 2005-06
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Related works:
Journal Article: Networks of manufacturers and retailers (2011) Downloads
Working Paper: Networks of manufacturers and retailers (2011) Downloads
Working Paper: Networks of Manufacturers and Retailers (2005) Downloads
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