Equilibrium Distribution Systems Under Retailers' Strategic Behavior
AbstractThis paper investigates what are the equilibrium distribution systems in a successive duopoly when retailers hold the power to choose the number of products they wish to market. Since they both can be multi-product sellers, the number of possible channel structures considered is larger than in previous work. Then, we study whether the resulting distribution systems obtained in earlier papers still remain. In particular, whether there are incentives to adopt exclusive distribution agreements, whether a manufacturer is foreclosed from the market and, essentially, whether there exists, at equilibrium, enough inter and intra-brand competition. The analysis shows that provided low brand asymmetry, it is sufficient that retailers hold the power to choose the number of products they wish to distribute to obtain endogenously both inter and intra-brand competition; both retailers become multi-product sellers. However, as the profitability of brands diverges sufficiently, only the most profitable brand will be distributed by both retailers thus only arising intra-brand competition at equilibrium. Neither the exclusive distribution system nor a common distribution system analized in the previous literature appears at equilibrium.
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Bibliographic InfoPaper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2001-01.
Length: 33 pages
Date of creation: Jan 2001
Date of revision:
Publication status: Published by Ivie
Distribution systems; retailer power.;
Find related papers by JEL classification:
- L19 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Other
- L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
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