Benefits of Channel Discord in the Sale of Durable Goods

Minimizing strife through vertical integration is commonly seen as the “holy grail” for long-term success in product distribution. In this paper, we take a different slant, showing that sometimes a separated channel that embodies a degree of discord can be helpful, particularly when a long-term view is taken. This result is shown in the context of durable goods manufacturing. The quandary of durable goods production is that once demand for a certain time frame is met, there is a subsequent temptation to flood the market with additional goods. As such, consumers are reluctant to buy immediately, instead opting to wait for discounted prices. This problem can be alleviated by a degree of channel discord: High wholesale prices ensure future sales will slow to a trickle.