Selling Co-Products through a Distributor: The Impact on Product Line Design

• 成果类型: Article
• 署名作者: Lu, Tao; Chen, Ying-Ju; Tomlin, Brian; Wang, Yimin
• 署名单位: Erasmus University Rotterdam - Excl Erasmus MC; Erasmus University Rotterdam; Hong Kong University of Science & Technology; Hong Kong University of Science & Technology; Dartmouth College; Arizona State University; Arizona State University-Tempe
• 刊物名称: PRODUCTION AND OPERATIONS MANAGEMENT
• ISSN/ISSBN: 1059-1478
• DOI: 10.1111/poms.12966
• 发表日期: 2019
• 页码: 1010-1032
• 关键词: co-product; product line design; indirect channel

摘要

A vertical co-product technology simultaneously produces multiple outputs that differ along a rankable quality metric. Co-product manufacturers often sell products through a distributor. We examine a setting in which a manufacturer sells vertically differentiated co-products through a self-interested distributor to quality-sensitive end customers. The manufacturer determines its production, product line design, and wholesale prices. The distributor determines its purchase quantities and retail prices. In traditional product-line design, products can be produced independently of each other and higher-quality products have higher production costs. This literature established that the length of the product line (i.e., difference between highest and lowest qualities) is greater in an indirect channel than in a direct channel. By contrast, co-products cannot be produced independently of each other. Among other findings, we establish that this interdependency causes the opposite channel effect: for co-products, the length of the product line is smaller in an indirect channel than in a direct channel. Additionally, we show that there exists a theoretical contract, combining revenue sharing and reverse slotting fees, that eliminates the indirect channel distortions in both product line design and output quantities.