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Manufacturers' incentive to establish direct‐to‐consumer channels

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  • Dong Joon Lee
  • Yuji Ono

Abstract

In this paper, we consider a manufacturing duopoly in which each manufacturer initially sells a homogenous product through its dedicated retailer. The main purpose of this paper is to examine whether each manufacturer will endogenously sell its product directly to consumers. Our main results are two. One is that one manufacturer chooses a direct distribution while the other does not. Conventional wisdom suggests that increased market competition is generally presumed to decrease profits. Here, “increased competition” could mean entry of new firms or softening of product differentiation. The other is that the profits of manufacturers are higher under a dual channel than under an indirect channel when the retailing costs of manufacturers are sufficiently small.

Suggested Citation

  • Dong Joon Lee & Yuji Ono, 2024. "Manufacturers' incentive to establish direct‐to‐consumer channels," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 45(1), pages 469-476, January.
    • Handle: RePEc:wly:mgtdec:v:45:y:2024:i:1:p:469-476
    DOI: 10.1002/mde.4017
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    References listed on IDEAS

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    Cited by:

    1. Yan Tang & Yunpei Cheng, 2025. "Carbon differentials and dual channels: The choice and impact of optimal strategies for manufacturer market encroachment," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 46(1), pages 347-360, January.

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