Multiproduct Intermediaries and Optimal Product Range
Andrew Rhodes (),
Makoto Watanabe () and
Jidong Zhou ()
MPRA Paper from University Library of Munich, Germany
This paper develops a framework for studying the optimal product range choice of a multiproduct intermediary when consumers demand multiple products. In the optimal product selection, the intermediary uses exclusively stocked high-value products to increase store traffic, and at the same time earns profit mainly from non-exclusively stocked products which are relatively cheap to buy from upstream suppliers. By doing this the intermediary can earn strictly positive profit, including in situations where it does not improve efficiency in selling products. A linkage between product selection and product demand features such as size and shape is established. It is also shown that relative to the social optimum, the intermediary tends to be too big and stock too many products exclusively.
Keywords: intermediaries; product range; multiproduct demand; search; exclusive contracts (search for similar items in EconPapers)
JEL-codes: D83 L42 L81 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-cta, nep-mic and nep-mkt
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Working Paper: Multiproduct Intermediaries and Optimal Product Range (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:82136
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