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In this paper, we study theoretically how luxury goods can signal wealth in the presence of high-quality, low-price counterfeits. We show that when high-quality, low-price counterfeits exist and are visibly indistinguishable from the authentic products, the classic Veblen thesis breaks down where the wealthy outspend the rest through conspicuous, excessive consumption to stand out. Instead, the wealthy may embrace “less is more,” or what we refer to as minimalist luxury to signal their status. More specifically, the wealthy may purposefully restrain from consumption of luxury goods, motivated either by market forces or by difference in consumer preferences, to separate themselves from the mimickers. In other words, “less” is more effective than “excessive” in signaling wealth. We derive this minimalist luxury equilibrium and explore managerial implications of the mechanism through which this equilibrium occurs.

Retailers often employ professionals known as retail buyers to help assess demand and determine the right quantities of products to order to meet uncertain demand in their stores. However, in many economies and industries, a manufacturer may seek to influence a (retail) buyer for its own advantage, by offering the buyer a kickback in return for a large order. As a result, the retailer and the manufacturer engage in a tug-of-war for influence over the buyer. In this paper, we introduce the role of the buyer as a distinct player into the workhorse dyadic model of a retail channel, and investigate the impact of kickback on channel efficiency as well as identify the winners and losers due to kickback. We find that the manufacturer need not always benefit from the kickback despite being the one offering it. Furthermore, the retailer may not always be the victim of the kickback. Indeed, the retailer may strategically trigger the kickback as a means to shift some of its buyer compensation cost to the manufacturer. Nevertheless, the buyer need not always be swayed by the kickback to distort the order quantity. Moreover, channel efficiency does not always suffer and may even improve because of kickback. Our analysis thus provides a more nuanced picture of kickback in a retail channel, and sheds some light on why manufacturer kickback is fairly prevalent in retail channels and can be difficult to eliminate.

We study how luxury brands can use product line expansion as a strategy when facing a threat from the counterfeit market. Consumers who are status-conscious consider the bene fits and costs of buying luxury items in order to strengthen the beliefs of others about their status. Our findings suggest that product line expansion strategy serves these high-end consumers and their motives to strengthen their status image. In a market with counterfeiters, consumers have an incentive to buy additional products in order to reduce the uncertainty of their status signals. Increasing consumption makes it harder for others to imitate status when authentic brands signal quality and status with higher precision compared to counterfeits. Since each luxury item purchased contributes to one's status in a marginally declining fashion, it is rational for a luxury brand to expand its product line such that it maintains its core product and introduces peripheral products with lower status signalling benefi ts and prices. We further show that an increasing counterfeit market share can increase status-conscious consumers' willingness to pay for luxury goods. As a result, presence of counterfeiters can increase the pro t of a luxury brand.

In recent decades, organized retailing has transformed the retailing landscape in emerging economies, where unorganized retailing has traditionally been dominant. In this paper, we build a theoretical model of unorganized and organized retailing in emerging economies by carefully modeling key characteristics of the retailing environment, the retailers, the consumers and product categories. The primary insight that we obtain is that in a competitive market comprising of only unorganized retailers, the advent of organized retailing injects efficiency into the market leading to a reduction in the number of unorganized retailers. This, in turn, makes the market less competitive. Building on this basic insight, we obtain a number of counter-intuitive results. For instance: (i) the presence of organized retailing may increase the prices charged by unorganized retailers, (ii) as the consumers’ transportation cost to the unorganized retailers increases, the market share of the unorganized retailing sector may increase, (iii) as the probability of bulk consumption increases and consumers prefer to purchase more from the organized retailer, prices and profits at the organized retailer may decrease, (iv) the presence of organized retailing can lead to both consumer and social surplus being lower because consumers face higher prices at unorganized retailers and there is wastage in the economy due to bulk purchasing at organized retailers. Our model offers an explanation for certain surprising empirical observations related to retailing in emerging markets, such as why in the last few years in the Indian market the unorganized retailers who have survived the advent of organized retailing seem to be doing better. Implications from our research can provide guidance to policy makers grappling with issues related to the balanced growth of unorganized and organized retailing in emerging markets.

In recent years, online retailers (e-tailers) have started allowing manufacturers direct access to their customers while charging a fee for providing this access, a format commonly referred to as agency selling. In this paper, we use a stylized theoretical model to answer a key question that e-tailers are facing: When should they use an agency selling format instead of using the more conventional reselling format? We find that agency selling is more effecient than reselling and leads to lower retail prices; however, the e-tailers end up giving control over retail prices to the manufacturer. Therefore, the reaction by the manufacturer, who makes electronic channel pricing decisions based on their impact on demand in the traditional channel (brick-and-mortar retailing), is an important factor for e-tailers to consider. We find that when sales in the electronic channel lead to a negative effect on demand in the traditional channel, e-tailers prefer agency selling, whereas when sales in the electronic channel lead to substantial stimulation of demand in the traditional channel, e-tailers prefer reselling. This preference is mediated by competition between e-tailers — as competition between them increases, e-tailers prefer to use agency selling. We also find that when e-tailers benefit from positive externalities from the sales of the focal product (such as additional profits from sales of complementary products), retail prices may be lower under reselling than under agency selling, and the e-tailers prefer reselling under some conditions where they would prefer agency selling without the positive externalities.

In many markets, a handset vendor and a service provider may enter into a tie-up for a handset to be available exclusively through the service provider. We examine when and why a service provider and a handset vendor may find this arrangement mutually profitable. We find that an exclusive tie-up may serve a dual strategic purpose. By restricting its handsets to one service provider, a handset vendor may be able to induce a rival handset vendor to compete less aggressively. At the same time, the service provider may be able to essentially raise a rival service provider's handset costs by limiting the handsets available to the rival. Interestingly, the handset vendor's market share may be higher when its handset is exclusive than when it is not. Our results might explain why exclusive tie-ups may be more attractive in some market settings than in others, why some service providers may have several exclusive handsets even if not all of them may be popular, and how some handset vendors may enjoy high market shares despite having many of their handsets exclusive. Further, supporting concerns raised by proponents of wireless network neutrality, an exclusive tie-up may lower the handset vendor's incentives to improve handset quality.

It is often argued that in competitive markets a firm expands its product line to benefit at the expense of its competitor: more products enable a firm to attract higher demand and/or charge higher prices to earn more profits. We show that these conclusions may be reversed, even without market size expansion. In our model, two firms competing in a horizontally differentiated market are located at its two ends, where each end signifies a firm’s home turf. Each firm considers expanding scope by launching a new product that directly attacks the competitor’s turf. We show that an equilibrium exists such that only the stronger turf firm expands scope, but profits can be higher for both firms. This is because scope expansion enables the stronger turf firm to better price discriminate among its customers while minimizing price competition. The competitor responds by lowering price to gain share and earns a higher profit. Thus, higher core prices for the stronger firm translate to higher demand for the competing firm, increasing profit for both. Similar results hold when firms deploy generic or defensive strategies during product line expansion.

Many firms today quantify the value of individual customers and serve them differentially; providing better service, prices and other inducements to high value customers. We refer to this practice as Customer Value-based Management (CVM). While previous research and popular press has strongly advocated CVM, firms have often met with mixed results. One possible reason why actual outcomes differ from anticipated results could be that firms often implement CVM in a competitive environment. Our objective is to study CVM explicitly in a competitive setting. We find that while some recommendations and prescriptions from past research continue to apply in a competitive environment, some others do not. For example, we find that one of the benefits of CVM in a competitive setting is that it can discourage the rival from competing intensely, by increasing the rival’s chances of acquiring unprofitable customers. In this context, low-value customers can play an important strategic role by limiting the intensity of rival’s poaching. Consequently, firing low value customers or even increasing their value may prove counter-productive.