The Length of Product Line in Distribution Channels
Marketing Science, Forthcoming
57 Pages Posted: 29 Sep 2009 Last revised: 7 Jul 2010
Date Written: September 28, 2009
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 which is socially optimal whereas a centralized channel cannot.
Keywords: Product Line, Distribution Channel, Consumer Heterogeneity, Game Theory
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