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Article
Implications for the role of retails in quality assurance
Production and Operations Management
  • Mingming LENG, Lingnan University
  • Zaichen LI, Lingnan University
  • Liping LIANG, Lingnan University
Document Type
Journal article
Publication Date
5-1-2016
Publisher
Wiley-Blackwell Publishing, Inc.
Keywords
  • quality gatekeeping,
  • pricing; game theory,
  • bargaining
Disciplines
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
E-ISSN
19375956
Publisher Statement

Copyright © 2015 Production and Operations Management Society.

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Citation Information
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