TY - JOUR
T1 - Retailers' choice of product variety and exclusive dealing under asymmetric information
AU - Yehezkel, Yaron
PY - 2008
Y1 - 2008
N2 - This article considers vertical relations between an upstream manufacturer and a downstream retailer that can independently obtain a low-quality, discount substitute. The analysis reveals that under full information, the retailer offers both varieties if and only if it is optimal to do so under vertical integration. However, when the retailer is privately informed about demand, it offers both varieties even if under vertical integration it is profitable to offer only the manufacturer's product. If the manufacturer can impose exclusive dealing, then under asymmetric information it will do so and foreclose the low-quality substitute even if under vertical integration it is profitable to offer both varieties.
AB - This article considers vertical relations between an upstream manufacturer and a downstream retailer that can independently obtain a low-quality, discount substitute. The analysis reveals that under full information, the retailer offers both varieties if and only if it is optimal to do so under vertical integration. However, when the retailer is privately informed about demand, it offers both varieties even if under vertical integration it is profitable to offer only the manufacturer's product. If the manufacturer can impose exclusive dealing, then under asymmetric information it will do so and foreclose the low-quality substitute even if under vertical integration it is profitable to offer both varieties.
UR - http://www.scopus.com/inward/record.url?scp=44249083252&partnerID=8YFLogxK
U2 - 10.1111/j.1756-2171.2008.00006.x
DO - 10.1111/j.1756-2171.2008.00006.x
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AN - SCOPUS:44249083252
VL - 39
SP - 115
EP - 143
JO - RAND Journal of Economics
JF - RAND Journal of Economics
SN - 0741-6261
IS - 1
ER -