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Multiproduct Intermediaries and Optimal Product Range

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  • Rhodes, Andrew
  • Watanabe, Makoto
  • Zhou, Jidong

Abstract

This paper develops a framework for studying the optimal product range choice of a multiproduct intermediary when consumers demand multiple products. In the optimal product selection, the intermediary uses exclusively stocked high-value products to increase store tra¢ c, and at the same time earns pro?t mainly from non-exclusively stocked products which are relatively cheap to buy from upstream suppliers. By doing this the intermediary can earn strictly positive pro?t, including in situations where it does not improve e¢ ciency in selling products. A linkage between product selection and product demand features such as size and shape is established. It is also shown that relative to the social optimum, the intermediary tends to be too big and stock too many products exclusively.

Suggested Citation

  • Rhodes, Andrew & Watanabe, Makoto & Zhou, Jidong, 2017. "Multiproduct Intermediaries and Optimal Product Range," TSE Working Papers 17-857, Toulouse School of Economics (TSE).
  • Handle: RePEc:tse:wpaper:32174
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    References listed on IDEAS

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    Cited by:

    1. Parakhonyak, Alexei & Titova, Maria, 2018. "Shopping malls, platforms and consumer search," International Journal of Industrial Organization, Elsevier, vol. 58(C), pages 183-213.

    More about this item

    Keywords

    intermediaries; product range; multiproduct demand; search; exclusive contracts;

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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