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Multiproduct Intermediaries

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

Abstract

This paper develops a new framework for studying multiproduct intermediaries when consumers demand multiple products and face search frictions. We show that a multiproduct intermediary is proÖtable even when it does not improve consumer search e¢ ciency. In its optimal product selection, it stocks high-value products exclusively to attract consumers to visit, then proÖts by selling non-exclusive products which are relatively cheap to buy from upstream suppliers. However, relative to the social optimum, the intermediary tends to be too big and stock too many products exclusively. As applications we use the framework to study the optimal design of a shopping mall, and the impact of direct-to-consumer sales by upstream suppliers on the retail market.

Suggested Citation

  • Rhodes, Andrew & Watanabe, Makoto & Zhou, Jidong, 2017. "Multiproduct Intermediaries," TSE Working Papers 17-857, Toulouse School of Economics (TSE), revised May 2020.
    • Handle: RePEc:tse:wpaper:32174
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Heski Bar-Isaac & Sandro Shelegia, 2023. "Search, Showrooming, and Retailer Variety," Marketing Science, INFORMS, vol. 42(2), pages 251-270, March.
    2. Parakhonyak, Alexei & Titova, Maria, 2018. "Shopping malls, platforms and consumer search," International Journal of Industrial Organization, Elsevier, vol. 58(C), pages 183-213.
    3. Gary Biglaiser & Fei Li & Charles Murry & Yiyi Zhou, 2020. "Intermediaries and product quality in used car markets," RAND Journal of Economics, RAND Corporation, vol. 51(3), pages 905-933, September.
    4. Yongmin Chen, 2024. "Search and Competition Under Product Quality Uncertainty," Journal of Industrial Economics, Wiley Blackwell, vol. 72(2), pages 633-661, June.
    5. Rubing Li & Arun Sundararajan, 2024. "The Rise of Recommerce: Ownership and Sustainability with Overlapping Generations," Papers 2405.09023, arXiv.org.
    6. Edona Reshidi, 2022. "Vertical Bargaining and Obfuscation," Staff Working Papers 22-13, Bank of Canada.
    7. Greminger, Rafael, 2022. "Essays on consumer search," Other publications TiSEM 404020a9-8337-4950-b57f-0, Tilburg University, School of Economics and Management.

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    More about this item

    Keywords

    intermediaries; product range; multiproduct demand; search; direct-to-consumer sales; product range; exclusivity;
    All these keywords.

    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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