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Expanding distribution channels

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  • Noriaki Matsushima

Abstract

I provide a model in which upstream producers, whose production cost is quadratic in quantity, sell their products through two distribution channels, a traditional channel and an external retailer. Some producers (called ‘large’ producers) supply to both channels, whereas other producers (called ‘small’ producers) are only able to supply to the traditional channel. All producers compete in quantity in the traditional channel. The external retailer offers a nondiscriminatory per unit payment to upstream producers. I show that distribution channel expansion executed by a small producer can decrease the producer’s profit and the sum of the upstream producers’ profits.

Suggested Citation

  • Noriaki Matsushima, 2017. "Expanding distribution channels," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 24(3-4), pages 464-484, October.
    • Handle: RePEc:taf:raaexx:v:24:y:2017:i:3-4:p:464-484
    DOI: 10.1080/16081625.2016.1188453
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    References listed on IDEAS

    as
    1. Toshihiro Matsumura & Noriaki Matsushima, 2012. "Airport Privatization And International Competition," The Japanese Economic Review, Japanese Economic Association, vol. 63(4), pages 431-450, December.
    2. Akio Kawasaki & Ming Hsin Lin & Noriaki Matsushima, 2014. "Multi‐Market Competition, R&D, and Welfare in Oligopoly," Southern Economic Journal, John Wiley & Sons, vol. 80(3), pages 803-815, January.
    3. Agbo, Maxime & Rousselière, Damien & Salanié, Julien, 2015. "Agricultural marketing cooperatives with direct selling: A cooperative–non-cooperative game," Journal of Economic Behavior & Organization, Elsevier, vol. 109(C), pages 56-71.
    4. repec:hal:journl:halshs-01090500 is not listed on IDEAS
    5. Noriaki Matsushima & Laixun Zhao, 2015. "Multimarket Linkages, Trade and the Productivity Puzzle," Review of International Economics, Wiley Blackwell, vol. 23(1), pages 1-13, February.
    6. JaeBin Ahn & Alexander F. McQuoid, 2017. "Capacity Constrained Exporters: Identifying Increasing Marginal Cost," Economic Inquiry, Western Economic Association International, vol. 55(3), pages 1175-1191, July.
    7. Maxime Agbo & Damien Rousselière & Julien Salanié, 2015. "Agricultural Marketing Cooperatives with Direct Selling : A Cooperative Non Cooperative Game," Post-Print halshs-01208281, HAL.
    8. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
    9. Winston W. Chang & Han Eol Ryu, 2015. "Vertically Related Markets, Foreign Competition and Optimal Privatization Policy," Review of International Economics, Wiley Blackwell, vol. 23(2), pages 303-319, May.
    10. repec:hal:journl:halshs-01098762 is not listed on IDEAS
    11. Matsushima, Noriaki & Shinohara, Ryusuke, 2014. "What factors determine the number of trading partners?," Journal of Economic Behavior & Organization, Elsevier, vol. 106(C), pages 428-441.
    12. Kostas Karantininis & Angelo Zago, 2001. "Endogenous Membership in Mixed Duopsonies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(5), pages 1266-1272.
    13. Wei-yu Kevin Chiang & Dilip Chhajed & James D. Hess, 2003. "Direct Marketing, Indirect Profits: A Strategic Analysis of Dual-Channel Supply-Chain Design," Management Science, INFORMS, vol. 49(1), pages 1-20, January.
    14. Fousekis, Panos, 2015. "Location equilibria in a mixed duopsony with a cooperative," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 59(4), October.
    15. Soderbery, Anson, 2014. "Market size, structure, and access: Trade with capacity constraints," European Economic Review, Elsevier, vol. 70(C), pages 276-298.
    16. Panos Fousekis, 2015. "Location equilibria in a mixed duopsony with a cooperative," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 59(4), pages 518-532, October.
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    Cited by:

    1. Noriaki Matsushima & Shohei Yoshida, 2018. "The Countervailing Power Hypothesis when Dominant Retailers Function as Sales Promoters," Manchester School, University of Manchester, vol. 86(5), pages 665-680, September.
    2. Noriaki Matsushima & Shohei Yoshida, 2022. "The countervailing power hypothesis and contingent contracts," ISER Discussion Paper 1191, Institute of Social and Economic Research, Osaka University.

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