MARCOS SINGER () (Escuela de Administración, Pontificia Universidad Católica de Chile) PATRICIO DONOSO () (Escuela de Administración, Pontificia Universidad Católica de Chile)
Additional information is available for the following
registered author(s):
This paper studies a single-product distribution channel where a manufacturer produces goods, some of which are defective, and a retailer, detecting only a subset of the defective goods, passes the rest along to customers, who end up discarding them. Conjecturing the structure of the demand and cost functions that assume customers to have a decreasing marginal aversion to bad quality while both the supplier and the retailer make marginally increasing efforts to avoid bad quality, we deduce several implicit parameters, including quality cost, based on observable data, such as the share of the channel margin. Once all the parameters of the model are available, we analyze the result of vertical integration. We not only confirm the well-known fact that vertical integration improves the quality perceived by the customer, but also characterize the attitude of the supplier, who may or may not provide a better service, in terms of the sum and the difference of logarithms of the margins.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Article provided by Escuela de Administracion. Pontificia Universidad Católica de Chile. in its journal ABANTE.
Find related papers by JEL classification: C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.: