Understanding Value-Added Resellers' Assortments of Multi-Component Systems

Journal of Marketing, Forthcoming

33 Pages Posted: 18 Jan 2015 Last revised: 15 Aug 2016

See all articles by Sourav Ray

Sourav Ray

McMaster University - DeGroote School of Business

Mark E. Bergen

University of Minnesota - Carlson School of Management

George John

University of Minnesota - Twin Cities - Carlson School of Management

Date Written: June 9, 2016

Abstract

Inter-connect standards increase choices; e.g., in cardiac pacemakers, the IS-1 standard enables the “pulse generator” from six manufacturers to be combined with the “lead set” from the other five to add up to thirty additional mixed-brand pacemakers. However, observed assortment additions are much smaller, which poses a puzzle since manufacturers in extant models welcome such additions to reduce price competition and increase variety. Instead, conflict with the value-added resellers (VARs) who create, and carry these additions is commonplace. We extend the literature with our analytical model that shows VARs limit the number and composition of additions to gain better upstream terms. This conflict is exacerbated when “keystone” components are relatively more decisive in influencing customer choices, so their exclusion from an addition represents a larger loss. Our empirical study of the multi-billion dollar auto paint refinish market finds assortment additions consistent with our predictions. We conclude with discussing the role of channel support programs to ameliorate these conflicts.

Keywords: Multi-component systems, Value Added Resellers, VAR, Compatibility, Interoperability, Mix and Match, Economic model, Survey

JEL Classification: C72, L64, L81, M31, O14, O30

Suggested Citation

Ray, Sourav and Bergen, Mark E. and John, George, Understanding Value-Added Resellers' Assortments of Multi-Component Systems (June 9, 2016). Journal of Marketing, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2551059 or http://dx.doi.org/10.2139/ssrn.2551059

Sourav Ray (Contact Author)

McMaster University - DeGroote School of Business ( email )

1280 Main Street West
Hamilton, Ontario L8S 4M4
Canada
905-525-9140 x 22370 (Phone)
905-521-8995 (Fax)

Mark E. Bergen

University of Minnesota - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States
612-624-1821 (Phone)

George John

University of Minnesota - Twin Cities - Carlson School of Management ( email )

321 19th Avenue South
1220 Management and Economics
Minneapolis, MN 55455
United States
612-624-6841 (Phone)
612-626-8328 (Fax)

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