Implications for the role of retails in quality assurance
Document Type
Journal article
Source Publication
Production and Operations Management
Publication Date
5-2016
Volume
25
Issue
5
First Page
779
Last Page
790
Publisher
Wiley-Blackwell Publishing, Inc.
Keywords
quality gatekeeping, pricing; game theory, bargaining
Abstract
We investigate a manufacturer–retailer channel to explore the role of a retailer in assuring the quality of a manufacturer's product as a quality gatekeeper. Such a gatekeeping activity can entail a reduction in the defective rate for consumers, if the retailer charges the manufacturer a penalty for each identified defect that is no smaller than the market penalty for an unidentified defect. As a result of the retailer's gatekeeping, the change in the negotiated wholesale price only depends on the manufacturer's individual benefit, whereas the change in the retailer's optimal retail price is associated with the channel-wide benefit. When the impact of quality relative to retail price on demand is higher, the retailer benefits more from her gatekeeping activity, thus having a greater incentive to take on the quality gatekeeping responsibility. Moreover, the retailer's gatekeeping generates a larger increase in the demand as well as each firm's profit, when the retailer has a stronger relative bargaining power.
DOI
10.1111/poms.12501
Print ISSN
10591478
E-ISSN
19375956
Publisher Statement
Copyright © 2015 Production and Operations Management Society.
Access to external full text or publisher's version may require subscription.
Full-text Version
Publisher’s Version
Language
English
Recommended Citation
Leng, M., Li, Z., & Liang, L. (2016). Implications for the role of retails in quality assurance. Production and Operations Management, 25(5), 779-790. doi: 10.1111/poms.12501