Strategy & Business Economics Workshop - Jeanine Miklos-Thal
Thu, 03/23/2017 - 4:15pm
University of Rochester
333 Sage Hall
"Making Sense of Restrictions on On-Line Sales"
This paper considers a vertical-contracting game between a supplier and competing retailers that sell both online and in brick-and-mortar outlets. We find that the supplier cannot achieve full channel coordination with standard supply contracts that depend on the total quantity ordered by a retailer, and we show that optimal contracts involve (direct or indirect) restrictions on online sales under realistic conditions. Our analysis offers a simple channel coordination explanation for vertical contracts that impose limits on the percentage of internet sales in the total sales made by a retailer. Banning restrictions on online sales can lead to a fall in the total quantity sold across the online and the offline channel and to lower social welfare.
Event Categories: Strategy & Business Economics