Yusong Wang, David R. Bell, V. Padmanabhan
Increasingly, manufacturers sell their products in their own retail stores, and many of these stores appear to be in direct competition with independent retailers; i.e., both types of retail stores are physically co-located. We analyze one way this practice affects the retail market. We find that, when independent retailers compete against company stores (instead of just against other independent retailers), they (1) charge higher prices and (2) are more willing to engage in marketing efforts on behalf of the manufacturer's brand. Furthermore, when company stores and independent retailers compete in the same market, the company store charges higher prices and provides more marketing effort. Anecdotal data are consistent with these model predictions. © 2008 Springer Science+Business Media, LLC.
School of Management, Fudan University, Shanghai 200433, 670 Guoshun Road, China; Wharton School, University of Pennsylvania, 700 Jon M. Huntsman Hall, Philadelphia, PA 19104, 3730 Walnut Street, United States; INSEAD, Singapore 138676, 1 Ayer Rajah Avenue, Singapore
