The length of product line in distribution channels

The length of product line in distribution channels

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

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