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Expanding distribution channels

Author

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  • Noriaki Matsushima

Abstract

We 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. We 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, 2016. "Expanding distribution channels," ISER Discussion Paper 0958, Institute of Social and Economic Research, The University of Osaka.
    • Handle: RePEc:dpr:wpaper:0958
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    References listed on IDEAS

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    1. 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.
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    8. 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.
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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, The University of Osaka.

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