Marketplace or Reseller?

Intermediaries can choose between functioning as a marketplace (in which suppliers sell their products directly to buyers) or as a reseller (by purchasing products from suppliers and selling them to buyers). We model this as a decision between whether control rights over a noncontractible decision variable (the choice of some marketing activity) are better held by suppliers (the marketplace mode) or by the intermediary (the reseller mode). Whether the marketplace or the reseller mode is preferred depends on whether independent suppliers or the intermediary have more important information relevant to the optimal tailoring of marketing activities for each specific product. We show that this trade-off is shifted…