Abstract
This paper develops a new framework for studying multiproduct intermediaries when consumers demand multiple products and face search frictions. We show that a multiproduct intermediary is profitable even when it does not improve consumer search efficiency. The intermediary optimally stocks high-value products exclusively to attract consumers to visit and then profits by selling nonexclusive products that are relatively cheap to buy from upstream suppliers. Relative to the social optimum, the intermediary tends to be too big and stock too many products exclusively. We use the framework to study the design of shopping malls and the impact of direct-to-consumer sales by upstream suppliers on the retail market.
| Original language | English |
|---|---|
| Pages (from-to) | 421-464 |
| Number of pages | 44 |
| Journal | Journal of Political Economy |
| Volume | 129 |
| Issue number | 2 |
| DOIs | |
| Publication status | Published - Feb 2021 |
Bibliographical note
Funding Information:We are grateful for helpful comments from the editor and an anonymous referee, and we also thank Mark Armstrong, Heski Bar-Isaac, Alessandro Bonatti, Joyee Deb, Paul Ellickson, Doh-Shin Jeon, Bruno Jullien, Fei Li, Barry Nalebuff, Martin Obradovits, Rob Porter, Jerome Renault, Patrick Rey, Mike Riordan, Greg Shaffer, Andy Skrzypacz, Guofu Tan, Greg Taylor, Raphael Thomadsen, Glen Weyl, Mike Whinston, Chris Wilson, Julian Wright, and various seminar audiences. Rhodes acknowledges funding from the European Research Council (grant 670494) and the French National Research Agency (ANR) under the Investments for the Future program (Investissements d’Avenir; grant ANR-17-EURE-0010).
Publisher Copyright:
© 2020 by The University of Chicago. All rights reserved.
Copyright:
Copyright 2021 Elsevier B.V., All rights reserved.
Funding
We are grateful for helpful comments from the editor and an anonymous referee, and we also thank Mark Armstrong, Heski Bar-Isaac, Alessandro Bonatti, Joyee Deb, Paul Ellickson, Doh-Shin Jeon, Bruno Jullien, Fei Li, Barry Nalebuff, Martin Obradovits, Rob Porter, Jerome Renault, Patrick Rey, Mike Riordan, Greg Shaffer, Andy Skrzypacz, Guofu Tan, Greg Taylor, Raphael Thomadsen, Glen Weyl, Mike Whinston, Chris Wilson, Julian Wright, and various seminar audiences. Rhodes acknowledges funding from the European Research Council (grant 670494) and the French National Research Agency (ANR) under the Investments for the Future program (Investissements d’Avenir; grant ANR-17-EURE-0010).
| Funders | Funder number |
|---|---|
| Horizon 2020 Framework Programme | 670494 |