Cross sales in supply chains will happen in quantity competition

• March 24, 2010 5:00am

The International Journal of Production Economics recently accepted new research for publication from Cal State East Bay Management Professor Chongqi Wu.

In “Cross sales in supply chains: An equilibrium analysis”, Wu says to consider a supply chain system with two manufacturers, each producing a single substitutable product.  The products are sold through two retailers, each to be privately owned or owned by the manufacturer. A manufacturer is free to use a single retailer or both. He defines cross sales to be the situation where at least one retailer sells both products and analyze the cross sales in channels with different degree of vertical integration. Wu shows that cross sale will happen in quantity competition or in a capacity constrained price competition. However, cross sales may never happen in a pure Bertrand price competition.