Channel Dynamics Under Price and Service Competition
Top Cited Papers
- 1 October 2000
- journal article
- Published by Institute for Operations Research and the Management Sciences (INFORMS) in Manufacturing & Service Operations Management
- Vol. 2 (4), 372-391
- https://doi.org/10.1287/msom.2.4.372.12342
Abstract
This paper studies a distribution system in which a manufacturer supplies a common product to two independent retailers, who in turn use service as well as retail price to directly compete for end customers. We examine the drivers of each firm's strategy, and the consequences for total sales, market share, and profitability. We show that the relative intensity of competition with respect to each competitive dimension plays a key role, as does the degree of cooperation between the retailers. We discover a number of insights concerning the preferences of each party regarding competition. For instance, there will be circumstances under which both retailers would prefer an increase in competitive intensity. Our analysis generalizes existing knowledge about manufacturer wholesale pricing strategies, and rationalizes behaviors that would not be evident without both price and service competition. Finally, we characterize the structure of wholesale pricing mechanisms that can coordinate the system, and show that the most commonly used formats (those that are linear in the order quantity) can achieve coordination only under very limiting conditions.Keywords
This publication has 27 references indexed in Scilit:
- Capacity Choice and Allocation: Strategic Behavior and Supply Chain PerformanceManagement Science, 1999
- Capacity Allocation Using Past Sales: When to Turn-and-EarnManagement Science, 1999
- Competitive Supply Chain Inventory ManagementPublished by Springer Science and Business Media LLC ,1999
- Quality and CompetitionManagement Science, 1998
- Managing a Distribution Channel Under Asymmetric Information with Performance RequirementsManagement Science, 1997
- Price competition in a duopoly common retailer channelJournal of Retailing, 1996
- Nonprice CompetitionThe Antitrust Bulletin, 1993
- On Credible Delegation by Oligopolists: A Discussion of Distribution Channel ManagementManagement Science, 1989
- Asymmetries in cost structures and incentives towards price competitionInternational Journal of Industrial Organization, 1985
- Quality and Quantity CompetitionThe Review of Economic Studies, 1979