On the benefits of assortment-based cooperation among independent producers

Abstract

Motivated by the challenges small- to medium-size companies face in export-oriented industries, we consider a competitive market for a set of substitutable products. Depending on the assortment of the firms and the substitution behavior of the customer, either a product is sold to the customer or the sale is lost. We consider the cooperation of independent producers that offer a combined set of products to their customers. Producers use discounted price contracts to manage the exchange of products among themselves. We propose an analytical model that enables us to determine the characteristics of firms and their products that would facilitate a beneficial cooperation. We conclude that a coop..