Abstract
This paper studies a manufacturer's optimal decisions on extending its product line when the manufacturer sells through either a centralized channel or a decentralized channel. We show that a manufacturer may provide a longer product line for consumers in a decentralized channel than in a centralized channel if the market is fully covered. In addition, a manufacturer's decisions on the length of its product line may not always be optimal from a social welfare perspective in either a centralized or a decentralized channel. Under certain conditions, a decentralized channel can provide the product line length that is socially optimal, whereas a centralized channel cannot.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 474-482 |
| Number of pages | 9 |
| Journal | Marketing Science |
| Volume | 29 |
| Issue number | 3 |
| DOIs | |
| State | Published - May 2010 |
Keywords
- Consumer heterogeneity
- Distribution channel
- Game theory
- Product line