Twentieth International Conference on Knowledge, Culture, and Change in Organizations

Abstract

Downstream centralization or decentralization is an important channel integration decision. Extant research has examined how manufacturers selling regular goods make this decision. However, when purchasing status goods such as cars and handbags, consumers exhibit preferences for social status signaled by conspicuous consumption of the goods. In this paper, we examine how consumers’ status preferences change manufacturers’ channel integration decision. Existing research on regular goods has established that a monopolist manufacturer should centralize channel to avoid the double marginalization problem, whereas competing manufacturers decentralize channels to muffle competition. By contrast, we show that these results may not apply for manufacturers of status goods. Analyzing a market with high-end consumers (i.e., snobs) who prefer uniqueness and low-end consumers (i.e., followers) who prefer conformity, we find that consumers’ status preferences can lead a monopolist manufacturer to decentralize channel and induce competing manufacturers to centralize channel. Moreover, we find that status preferences can lead symmetric manufacturers to choose asymmetric channel structures.