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Expanding distribution channels

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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, 2015. "Expanding distribution channels," ISER Discussion Paper 0958, Institute of Social and Economic Research, Osaka University.
  • Handle: RePEc:dpr:wpaper:0958
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    File URL: https://www.iser.osaka-u.ac.jp/library/dp/2016/DP0958.pdf
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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.
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    3. 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.
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    7. 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.
    8. 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.
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    12. 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.
    13. 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.
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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.

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