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Multiproduct Intermediaries

Author

Listed:
  • Andrew Rhodes
  • Makoto Watanabe
  • Jidong Zhou

Abstract

This paper develops a new framework for studying multiproduct intermediaries when consumers demand multiple products and face search frictions. We show that a multiproduct intermediary is profitable even when it does not improve consumer search efficiency. The intermediary optimally stocks high-value products exclusively to attract consumers to visit and then profits by selling nonexclusive products that are relatively cheap to buy from upstream suppliers. Relative to the social optimum, the intermediary tends to be too big and stock too many products exclusively. We use the framework to study the design of shopping malls and the impact of direct-to-consumer sales by upstream suppliers on the retail market.

Suggested Citation

  • Andrew Rhodes & Makoto Watanabe & Jidong Zhou, 2021. "Multiproduct Intermediaries," Journal of Political Economy, University of Chicago Press, vol. 129(2), pages 421-464.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/711917
    DOI: 10.1086/711917
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    Cited by:

    1. Edona Reshidi, 2022. "Vertical Bargaining and Obfuscation," Staff Working Papers 22-13, Bank of Canada.
    2. Parakhonyak, Alexei & Titova, Maria, 2018. "Shopping malls, platforms and consumer search," International Journal of Industrial Organization, Elsevier, vol. 58(C), pages 183-213.
    3. Greminger, Rafael, 2022. "Essays on consumer search," Other publications TiSEM 404020a9-8337-4950-b57f-0, Tilburg University, School of Economics and Management.
    4. Rubing Li & Arun Sundararajan, 2024. "The Rise of Recommerce: Ownership and Sustainability with Overlapping Generations," Papers 2405.09023, arXiv.org.
    5. Heski Bar-Isaac & Sandro Shelegia, 2023. "Search, Showrooming, and Retailer Variety," Marketing Science, INFORMS, vol. 42(2), pages 251-270, March.
    6. Volker Nocke & Patrick Rey, 2024. "Consumer Search, Steering, and Choice Overload," Journal of Political Economy, University of Chicago Press, vol. 132(5), pages 1684-1739.
    7. Gary Biglaiser & Fei Li & Charles Murry & Yiyi Zhou, 2020. "Intermediaries and product quality in used car markets," RAND Journal of Economics, RAND Corporation, vol. 51(3), pages 905-933, September.
    8. Yongmin Chen, 2024. "Search and Competition Under Product Quality Uncertainty," Journal of Industrial Economics, Wiley Blackwell, vol. 72(2), pages 633-661, June.

    More about this item

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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