Managing e-channel profits: Signaling quality by selling through a reputable retailer

A channel of distribution consists of different channel members each having his decision. The focus of this paper is giving an example of renting the reputation of another agent to signal quality. In this paper, the author shows that a “maximally” separating equilibrium, manufacturers of high quality products distribute through retailers with strong reputation, while manufacturers of low quality products distribute through retailers with no reputation. In this way, even if high quality manufacturers have no reputation of their own, they can signal quality by posting the reputation of the retailers.