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Retail Competition and the Dynamics of Demand for Tied Goods

Author

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  • Wesley R. Hartmann

    () (Stanford Graduate School of Business, Stanford University, Stanford, California 94305)

  • Harikesh S. Nair

    () (Stanford Graduate School of Business, Stanford University, Stanford, California 94305)

Abstract

We present a demand system for tied goods incorporating dynamics arising from the tied nature of the products and the stockpiling induced by storability and durability. We accommodate competition across tied good systems and competing downstream retail formats by endogenizing the retail format at which consumers choose to stockpile inventory. This facilitates measurement of long-run retail substitution effects and yields estimates of complementarities within, and substitution across, competing systems of tied goods. We present an empirical application to an archetypal tied goods category: razors and blades. We discuss the implications of measured effects for manufacturer pricing when selling the tied products through an oligopolistic downstream retail channel and assess the extent to which retail substitution reduces channel conflict.

Suggested Citation

  • Wesley R. Hartmann & Harikesh S. Nair, 2010. "Retail Competition and the Dynamics of Demand for Tied Goods," Marketing Science, INFORMS, vol. 29(2), pages 366-386, 03-04.
  • Handle: RePEc:inm:ormksc:v:29:y:2010:i:2:p:366-386
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    File URL: http://dx.doi.org/10.1287/mksc.1090.0518
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Stephen Ryan & Catherine Tucker, 2012. "Heterogeneity and the dynamics of technology adoption," Quantitative Marketing and Economics (QME), Springer, vol. 10(1), pages 63-109, March.
    2. Jean-Pierre Dubé & Günter J. Hitsch & Peter E. Rossi, 2010. "State dependence and alternative explanations for consumer inertia," RAND Journal of Economics, RAND Corporation, vol. 41(3), pages 417-445.
    3. Sanjiv Erat & Sreekumar R. Bhaskaran, 2012. "Consumer Mental Accounts and Implications to Selling Base Products and Add-ons," Marketing Science, INFORMS, vol. 31(5), pages 801-818, September.
    4. Pradeep K. Chintagunta & Harikesh S. Nair, 2011. "Structural Workshop Paper --Discrete-Choice Models of Consumer Demand in Marketing," Marketing Science, INFORMS, vol. 30(6), pages 977-996, November.
    5. repec:eee:ijrema:v:34:y:2017:i:4:p:813-828 is not listed on IDEAS
    6. Bryan Bollinger, 2015. "Green technology adoption: An empirical study of the Southern California garment cleaning industry," Quantitative Marketing and Economics (QME), Springer, vol. 13(4), pages 319-358, December.
    7. repec:kap:qmktec:v:15:y:2017:i:3:d:10.1007_s11129-017-9186-9 is not listed on IDEAS
    8. Tiago Pires, 2016. "Costly search and consideration sets in storable goods markets," Quantitative Marketing and Economics (QME), Springer, vol. 14(3), pages 157-193, September.
    9. Jiang, Yuanchun & Shang, Jennifer & Liu, Yezheng & May, Jerrold, 2015. "Redesigning promotion strategy for e-commerce competitiveness through pricing and recommendation," International Journal of Production Economics, Elsevier, vol. 167(C), pages 257-270.
    10. Carl F. Mela, 2011. "Structural Workshop Paper --Data Selection and Procurement," Marketing Science, INFORMS, vol. 30(6), pages 965-976, November.

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