IDEAS home Printed from
   My bibliography  Save this paper

Strategic Assortment Reduction by a Dominant Retailer Strategic Assortment Reduction by a Dominant Retailer


  • Anthony Dukes

    (University of Aarhus)

  • Tansev Geylani

    (University of Pittsburgh)

  • Kannan Srinivasan

    (Tepper School of Business, Carnegie Mellon University)


In certain product categories, large discount retailers are known to offer shallower assortments than traditional retailers. In this paper, we investigate the competitive incentives for such assortment decisions and the implications for manufacturers’ distribution strategies. Our results show that if one retailer has the channel power to determine its assortment first, then it can strategically reduce its assortment by carrying only the popular variety while simultaneously inducing the rival retailer to carry both the specialty and popular varieties. The rival retailer then bears higher assortment costs, which leads to relaxed price competition for the commonly carried popular variety. We also show that when the manufacturer has relative channel power, it chooses alternatively to distribute both product varieties through both retailers. Our analysis suggests, therefore, that when a retailer becomes dominant in the distribution channel, it facilitates retail segmentation into discount shops, carrying limited product lines, and specialty shops carrying wider assortments. We also illustrate how retailer power leading to strategic assortment reduction can lead to lower consumer surplus.

Suggested Citation

  • Anthony Dukes & Tansev Geylani & Kannan Srinivasan, 2006. "Strategic Assortment Reduction by a Dominant Retailer Strategic Assortment Reduction by a Dominant Retailer," CIE Discussion Papers 2007-07, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
  • Handle: RePEc:kud:kuieci:2007-07

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. James W. Friedman, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Oxford University Press, vol. 38(1), pages 1-12.
    2. Schmidt, Klaus M. & Schnitzer, Monika, 1995. "The interaction of explicit and implicit contracts," Economics Letters, Elsevier, vol. 48(2), pages 193-199, May.
    3. B. Douglas Bernheim & Michael D. Whinston, 1990. "Multimarket Contact and Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 1-26, Spring.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Ma, Lidan & Zhang, Rong & Guo, Sandang & Liu, Bin, 2012. "Pricing decisions and strategies selection of dominant manufacturer in dual-channel supply chain," Economic Modelling, Elsevier, vol. 29(6), pages 2558-2565.

    More about this item


    channels of distribution; channel power; assortment; retailing; game theory;

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kud:kuieci:2007-07. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Hoffmann). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.