Innovation and Distribution: A General Equilibrium Model of Manufacturing and Retailing

Bart Bronnenberg

No 13058, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: I propose a general equilibrium model of competition in manufacturing and retailing. Relative to the counterfactual of direct sales by manufacturers, the retail sector increases manufacturing entry and produced variety. Although double marginalization in the sales channel raises prices and hurts consumers in quantity, the retail sector increases variety and convenience, both valued positively. Pricing power in the vertical channel reflects surplus or scarcity of manufactured substitutes relative to retailer store size. Finally, the size of the retail sector is a constant fraction of the total economy across nations of differing size and wealth.

Keywords: Marketing; Retailing; Demand (search for similar items in EconPapers)
JEL-codes: D11 D21 L13 L81 M31 (search for similar items in EconPapers)
Date: 2018-07
New Economics Papers: this item is included in nep-com
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