The author proposes that the parties in vertical trading relationships allocate their efforts toward manufacturing and information exchange such that no other arrangement makes them all better off. In some cases this reduces to the suggestion that a change should be made if one party can pay others to do it.
Get full access to this article
View all access options for this article.
References
1.
AlbaJoseph W., and Wesley HutchinsonJ. (1987), “Dimensions of Consumer Expertise,”Journal of Consumer Research, 13(March), 411–54.
2.
AndersonErin (1985), “The Salesperson as Outside Agent or Employee: A Transaction Cost Analysis,”Marketing Science, 4(Summer), 234–54.
3.
AndersonErin, and WeitzBarton A. (1986), “Make-or-Buy Decisions: Vertical Integration and Marketing Productivity,”Sloan Management Review, 27(Spring), 3–19.
4.
ArrowKenneth J. (1951), “An Extension of the Basic Theorems of Welfare Economics,” in Proceedings of the 2nd Berkeley Symposium on Mathematical Statistics, NeymanJ., ed. Berkeley, CA: University of California Press.
5.
BeckerGary S. (1965), “Theory of the Allocation of Time,”Economic Journal, 75(September), 493–517.
6.
BeckerGary S. (1991), “A Note on Restaurant Pricing and Other Examples of Social Influence on Price,”Journal of Political Economy, 99(December), 1109–16.
7.
BetancourtRoger R., and GautschiDavid (1990), “Demand Complementarities, Household Production, and Retail Assortment,”Marketing Science, 9(Spring), 146–61.
8.
BetancourtRoger R., and GautschiDavid (1991), “The Demand for Retail Products and the Household Production Model,”Journal of Economic Behaviour and Organization, 17(December), 257–75.
9.
BetancourtRoger R., and GautschiDavid (1993), “Two Essential Characteristics of Retail Markets and Their Economics Consequences,”Journal of Economic Behaviour and Organization, 21(December), 277–94.
10.
BucklinL. Peter (1967), “Postponement, Speculation and the Structure of Distribution Channels,” in The Marketing Channel: A Conceptual Viewpoint, MallenB., ed. New York: John Wiley & Sons, Inc.
11.
BucklinL. Peter (1972), Competition and Evolution in the Distributive Trades.Englewood Cliffs, NJ: Prentice- Hall, Inc.
12.
Calyx and Corolla (1992), Harvard Business School case 9-592-035.Boston, MA: Publishing Division, Harvard Business School.
13.
Census of Retail Trade, 1987 (1990). Washington, DC: U.S. Department of Commerce.
14.
ChenYongmin, and RosenthalRobert W. (1994), “Asking Prices as Commitment Devices,” working paper, Department of Economics, Boston University.
15.
ChuWujin (1992), “Demand Signalling and Screening in Channels of Distribution,”Marketing Science, 11(Fall), 327–47.
16.
CoaseRonald H. (1960), “The Problem of Social Cost,”Journal of Law and Economics, 3(October), 1–44.
17.
Direct Marketing Association (1991), Statistical Fact Book.New York: Direct Marketing Association.
18.
EhrlichIsaac, and FisherLawrence (1982), “The Derived Demand for Advertising: A Theoretical and Empirical Investigation,”American Economic Review, 82(June), 366–88.
19.
FanningDavid (1993), “Circumventing Channels: Direct Marketing in Japan as a Form of Distribution Arbitrage,” unpublished master's thesis, Sload School of Management, MIT.
20.
Fortune (1992), June 1.
21.
GilbertRichard J., and LiebermanMarvin (1987), “Investment and Coordination in Oligopolistic Industries,”Rand Journal of Economics, 18(Spring), 17–33.
22.
GrossmanSanford J., and HartOliver E. (1986), “The Costs and Benefits of Ownership,”Journal of Political Economy, 94(August), 691–719.
23.
HallerHans, and IoannidesYannis (1992), “Strategic Choice of Market Contacts,” Working Paper E-92-18, Department of Economics, Virginia Polytechnic Institute and State University.
HeideJan B., and JohnGeorge (1990), “Alliances in Industrial Purchasing: The Determinants of Joint Action in Buyer-Supplier Relationships,”Journal of Marketing Research, 27(February), 24–36.
26.
JeulandAbel, and ShuganSteven (1983), “Managing Channel Profits,”Marketing Science,2(Summer), 239–72.
27.
KimBok S. (1992), “The Sales Strategy for High Technology Products,” unpublished master's thesis, Sloan School of Management, MIT.
28.
KirmaniAmna, and WrightPeter (1989), “Money Talks: Perceived Advertising Expense and Expected Product Quality,”Journal of Consumer Research, 16(December), 344–53.
29.
LeleMiland M. (1986), “Change Channels During Your Product's Life Cycle,”Business Marketing (December), 61–69.
30.
LilienGary L. (1979), “ADVISOR 2: Modeling the Marketing Mix Decision for Industrial Products,”Management Science, 25(February), 191–204.
31.
MilgromPaul R., and John RobertsD. (1986), “Price and Advertising Signals of New Product Quality,”Journal of Political Economy, 94(August), 796–821.
32.
MontgomeryCynthia A., and WernerfeltBirger (1992), “Risk Reduction and Umbrella Branding,”Journal of Business, 65(January), 31–50.
33.
MoorthyK. Sridhar (1985), “Using Game Theory to Model Competition,”Journal of Marketing Research, 22(August), 262–82.
34.
NelsonPhilip (1970), “Information and Consumer Behaviour,”Journal of Political Economy, 78(April), 311–29.
35.
PashigianB. Peter (1988), “Demand Uncertainty and Sales: A Study of Fashion and Markdown Pricing,”American Economic Review, 78(December), 936–53.
36.
PashigianB. Peter, and BowenBrian (1990), “The Rising Cost of Time and the Substitution Between National Brands and Retail Services,” working paper, Graduate School of Business, University of Chicago.
37.
RatchfordBrian, LeeMyung Soo, and SambandamRojan (1993), “Satisfaction, Consideration, Search, and Choice,” mimeo, SUNY Buffalo.
38.
RatchfordBrian, and StoopsGlenn (1988), “A Model and Measurement Approach for Studying Retail Productivity,”Journal of Retailing, 64(Fall), 241–63.
39.
RussoJ. Edward (1987), “Toward Intelligent Product Information Systems,”Journal of Consumer Policy, 10(June), 109–38.
40.
SchmalenseeRichard L. (1978), “Entry Deterrence in the Ready-to-Eat Breakfast Cereal Industry,”Bell Journal of Economics,9(Spring), 305–27.
41.
ShuganSteven M. (1980), “The Cost of Thinking,”Journal of Consumer Research,1(September), 99–111.
42.
SimesterDuncan I. (1992), “Signalling and Commitment Using Retail Prices,” working paper, Graduate School of Business, University of Chicago.
43.
SimesterDuncan I. (1993), “Attracting Customers Using Efficient Advertising and Pricing Strategies,” working paper, Graduate School of Business, University of Chicago.
44.
Statistical Abstract of the United States (1992). Washington, DC: U.S. Department of Commerce.
45.
StiglerGeorge J., and BeckerGary S. (1977), “De Gustibus non est Disputandum,”American Economic Review, 67(March), 76–90.
46.
TaguchiGenichi (1986), Introduction to Quality Engineering.Dearborn, MI: American Supplier Institute, Inc.
47.
TiroleJean (1986), “Procurement and Renegotiation,”Journal of Political Economy, 94(April), 235–59.
48.
WernerfeltBirger (1988), “Umbrella Branding as a Signal of New Product Quality: An Example of Signalling by Posting a Bond,”Rand Journal of Economics, 19(Autumn), 458–66.
49.
WernerfeltBirger (1990), “Advertising Content When Brand Choice Is a Signal,”Journal of Business, 63(January), 91–98.
50.
WernerfeltBirger (1991), “Brand Loyalty and Market Equilibrium,”Marketing Science, 10(Summer), 229–45.
51.
WernerfeltBirger (1993), “The Employment Relationship and Economies of Scale in Contracting,” working paper, Sloan School of Management, MIT.
52.
WernerfeltBirger (1994a), “On the Function of Salesmen,”Marketing Science, 13(Winter), 68–82.
53.
WernerfeltBirger (1994b), “Selling Formats for Search Goods,”Marketing Science, 13(forthcoming).
54.
WilliamsonOliver E. (1985), The Economic Institutions of Capitalism.New York: The Free Press.
55.
WilliamsonOliver E. (1989), “Transaction Cost Economics,” in Handbook of Industrial Organization, Vol. 1, SchmalenseeRichard, and WilligRobert, eds. New York: North-Holland.
56.
WilliamsonOliver E. (1991), “Strategizing, Economizing and Economic Organization,”Strategic Management Journal, 12(Special Issue), 75–94.
