This paper develops a framework for studying the optimal product range choice of a multiproduct intermediary when consumers demand multiple products. In the optimal product selection, the intermediary uses exclusively stocked high-value products to increase store tra¢ c, and at the same time earns pro?t mainly from non-exclusively stocked products which are relatively cheap to buy from upstream suppliers. By doing this the intermediary can earn strictly positive pro?t, including in situations where it does not improve e¢ ciency in selling products. A linkage between product selection and product demand features such as size and shape is established. It is also shown that relative to the social optimum, the intermediary tends to be too big and stock too many products exclusively.
intermediaries; product range; multiproduct demand; search; exclusive contracts;
- D83: Search • Learning • Information and Knowledge • Communication • Belief
- L42: Vertical Restraints • Resale Price Maintenance • Quantity Discounts
- L81: Retail and Wholesale Trade • e-Commerce
Andrew Rhodes, Makoto Watanabe, and Jidong Zhou, “Multiproduct Intermediaries and Optimal Product Range”, TSE Working Paper, n. 17-857, October 2017.
TSE Working Paper, n. 17-857, October 2017