Seminar  |  01/07/2014 | 12:00 PM  –  01:30 PM

Brown Bag Seminar: How Sellers Choose Intermediaries

Henning Piezunka (Stanford University, Huang Engineering Center)

Sellers often seek intermediaries that can help them develop their products and market them to buyers. Sellers prefer intermediaries that have great market access, so that they can reach buyers, and where they have a high relative standing, so that they receive greater resources from the intermediary. However, these criteria are conflicting. A seller often needs to choose either an intermediary with limited market access, where it has a high relative standing (“big fish, little pond”), or an intermediary with great market access, where it has a low relative standing (“little fish, big pond”). I study how sellers resolve this dilemma by examining how 419 video game developers choose among 178 video game publishers over a nine-year period. I find that sellers’ resolutions of the dilemma are contingent on their own characteristics and on characteristics of the intermediaries. In particular, I find that sellers’ preferences shift towards great market access when they have more experience or a higher proportion of derivative products, but that they shift towards high relative standing when the competition among the sellers in the intermediary’s portfolio escalates due to a larger portfolio size or increased seller overlap.