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Retailers' choice of product variety and exclusive dealing under asymmetric information

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  • Yaron Yehezkel

Abstract

This article considers vertical relations between an upstream manufacturer and a downstream retailer that can independently obtain a low-quality, discount substitute. The analysis reveals that under full information, the retailer offers both varieties if and only if it is optimal to do so under vertical integration. However, when the retailer is privately informed about demand, it offers both varieties even if under vertical integration it is profitable to offer only the manufacturer's product. If the manufacturer can impose exclusive dealing, then under asymmetric information it will do so and foreclose the low-quality substitute even if under vertical integration it is profitable to offer both varieties. Copyright (c)2008, RAND.

Suggested Citation

  • Yaron Yehezkel, 2008. "Retailers' choice of product variety and exclusive dealing under asymmetric information," RAND Journal of Economics, RAND Corporation, vol. 39(1), pages 115-143.
  • Handle: RePEc:bla:randje:v:39:y:2008:i:1:p:115-143
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Johannes Paha, 2017. "Wholesale Pricing with Incomplete Information about Private Label Products," MAGKS Papers on Economics 201736, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    2. Argenton, C. & Willems, Bert, 2009. "Exclusivity as Inefficient Insurance," Discussion Paper 2009-24, Tilburg University, Center for Economic Research.
    3. repec:bla:stratm:v:38:y:2017:i:5:p:1134-1150 is not listed on IDEAS
    4. Zhijun Chen & Greg Shaffer, 2014. "Naked exclusion with minimum-share requirements," RAND Journal of Economics, RAND Corporation, vol. 45(1), pages 64-91, March.
    5. Cédric Argenton & Bert Willems, 2012. "Exclusivity Contracts, Insurance and Financial Market Foreclosure," Journal of Industrial Economics, Wiley Blackwell, vol. 60(4), pages 609-630, December.

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