Caprice, Stéphane and Shekhar, Shiva (2025) Welfare Implications of Supplier Encroachment With Consumer Shopping Costs. TSE Working Paper, n. 25-1629, Toulouse

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Abstract

In this paper, we study supplier encroachment in competition with multi-product retailers and its effects on retail profits under endoge-nous consumer shopping behavior. We find that supplier encroach-ment (weakly) increases both supplier and retailer profits, as the re-tailer benefits from better consumer segmentation and price discrim-ination despite (weakly) higher wholesale prices. The effect of en-croachment on consumers is more nuanced: when the competitive product’s value is high, consumers benefit. Instead, when the value of the competitive product is low, consumers buying exclusively from the multi-product retailer are worse off while consumers who mix and match across stores are better off. Overall, supplier encroachment can improve market outcomes if the value of the supplier’s product offering is sufficiently high.

Item Type: Monograph (Working Paper)
Language: English
Date: March 2025
Place of Publication: Toulouse
Additional Information: EN COURS CL
Uncontrolled Keywords: Encroachment, Vertical Contracting, Downstream Competition and Consumer Shopping Costs.
JEL Classification: L13 - Oligopoly and Other Imperfect Markets
L22 - Firm Organization and Market Structure - Markets vs. Hierarchies; Vertical Integration; Conglomerates; Subsidiaries
L42 - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
L81 - Retail and Wholesale Trade; Warehousing; e-Commerce
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse Capitole
Site: UT1
Date Deposited: 24 Mar 2025 09:30
Last Modified: 24 Mar 2025 09:30
OAI Identifier: oai:tse-fr.eu:130442
URI: https://publications.ut-capitole.fr/id/eprint/50678
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