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The Length of Product Line in Distribution Channels

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  • Yunchuan Liu

    ()
    (College of Business, University of Illinois at Urbana-Champaign, Champaign, Illinois 61820)

  • Tony Haitao Cui

    ()
    (Carlson School of Management, University of Minnesota, Minneapolis, Minnesota 55455)

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    Abstract

    This paper studies a manufacturer's optimal decisions on extending its product line when the manufacturer sells through either a centralized channel or a decentralized channel. We show that a manufacturer may provide a longer product line for consumers in a decentralized channel than in a centralized channel if the market is fully covered. In addition, a manufacturer's decisions on the length of its product line may not always be optimal from a social welfare perspective in either a centralized or a decentralized channel. Under certain conditions, a decentralized channel can provide the product line length that is socially optimal, whereas a centralized channel cannot.

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    File URL: http://dx.doi.org/10.1287/mksc.1090.0533
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    Bibliographic Info

    Article provided by INFORMS in its journal Marketing Science.

    Volume (Year): 29 (2010)
    Issue (Month): 3 (05-06)
    Pages: 474-482

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    Handle: RePEc:inm:ormksc:v:29:y:2010:i:3:p:474-482

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    Related research

    Keywords: product line; distribution channel; consumer heterogeneity; game theory;

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    Cited by:
    1. Rajagopalan, S. & Xia, Nan, 2012. "Product variety, pricing and differentiation in a supply chain," European Journal of Operational Research, Elsevier, vol. 217(1), pages 84-93.

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