Article ID: | iaor20104601 |
Volume: | 29 |
Issue: | 3 |
Start Page Number: | 474 |
End Page Number: | 482 |
Publication Date: | May 2010 |
Journal: | Marketing Science |
Authors: | Liu Yunchuan, Cui Tony Haitao |
Keywords: | distribution |
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.