Coordinating Channels Under Price and Nonprice Competition
Marketing Science
Product Line Design for a Distribution Channel
Marketing Science
Competition and Outsourcing with Scale Economies
Management Science
Sequential Product Positioning Under Differential Costs
Management Science
Buyer Search Costs and Endogenous Product Design
Marketing Science
Consumption Flexibility, Product Configuration, and Market Competition
Marketing Science
New Product Development Under Channel Acceptance
Marketing Science
Positioning and Pricing in a Variety Seeking Market
Management Science
The Strategic Perils of Low Cost Outsourcing
Management Science
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Upward channel decentralization occurs when firms choose to not manufacture products by themselves and procure products from upstream suppliers. Current voices from marketing scholars and practitioners have predominantly focused on the cost benefits when production is outsourced to lower-cost upstream suppliers. In this paper, we study the effects of upward channel decentralization where competing firms can outsource their production to upstream suppliers who do not have any advantages on production costs. We show how downstream firms can still benefit from upward channel decentralization provided their product positioning is endogenous. Thus, we provide a new theory on the strategic benefits of upward channel decentralization. We also use this framework to show a new benefit to manufacturers selling through downstream retailers rather than directly. We examine the implications of our theory for consumer and social welfare, and also draw managerial implications. This paper was accepted by Pradeep Chintagunta, marketing.