Title

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

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