This paper shows the conditions for consumer sorting to be profitable. Sorting of low quality goods dampens their substitutability with high quality goods and can raise firm's profit even when sorting lowers profit from low quality sales considered alone

Retailers act as intermediaries between manufacturers and consumers. When retailers sell their own products alongside those of manufacturers, what is the effect on competition? Further, how does this effect hinge on market power? In this paper, I theoretically and empirically study the effect of...