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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: http://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.
    2. 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.
    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. 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.
    5. repec:hal:journl:halshs-01090500 is not listed on IDEAS
    6. 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.
    7. 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.
    8. 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.
    9. Soderbery, Anson, 2014. "Market size, structure, and access: Trade with capacity constraints," European Economic Review, Elsevier, vol. 70(C), pages 276-298.
    10. 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.
    11. Alexander F. McQuoid & JaeBin Ahn, 2015. "Capacity Constrained Exporters: Identifying Increasing Marginal Cost," Departmental Working Papers 49, United States Naval Academy Department of Economics.
    12. repec:hal:journl:halshs-01098762 is not listed on IDEAS
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