Manufacturer product quality information disclosure with channel encroachment in the E‐commerce age

Abstract

This study investigates the interplay between a manufacturer's quality disclosure and channel encroachment. We show that there exists a U‐shaped pattern between the manufacturer's payoff and the disclosure cost, whereas the retailer's payoff exhibits a more complicated and nonmonotonic relationship with respect to the disclosure cost. Both firms may benefit from the increase of the disclosure cost when it falls into the intermediate range and when the channel substitution rate is not too low. The increase of the encroachment cost always hurts the manufacturer, and it may even hurt the retailer if it is medium and if the channel substitution rate is low.