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The effects of demand uncertainty on channel structure. (English) Zbl 1206.90065

Summary: Motivated by the business practice whereby some manufacturers open their own retail stores despite the existence of more efficient independent retailers, this paper examines the distribution channel choice of competing manufacturers under demand uncertainty and resale price maintenance. We characterize the conditions for the equilibrium channel structures. We find that (1) manufacturers tend to distribute products with more design attributes through their own retail stores, (2) manufacturers with highly substitutable products are more likely to use independent retailers, and (3) at least one manufacturer has more incentive to open its own retail stores when facing an increase of the market size asymmetry.

MSC:

90B60 Marketing, advertising
91B42 Consumer behavior, demand theory
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