The structure of equilibrium marketing channels: Common versus exclusive retailers
Vemuri, Vijaya Kumar
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https://hdl.handle.net/2142/19836
Description
Title
The structure of equilibrium marketing channels: Common versus exclusive retailers
Author(s)
Vemuri, Vijaya Kumar
Issue Date
1996
Doctoral Committee Chair(s)
Monahan, George E.
Department of Study
Business Administration
Discipline
Business Administration
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Business Administration, General
Business Administration, Marketing
Language
eng
Abstract
Coordination and control are critical aspects in the design of marketing channels due to the interdependence of various channel members and the complex flow of products, title to the products, payments and information. Important marketing decisions, such as prices and the level of promotional services, are often delegated to members of the marketing channel with divergent individual incentives. In this dissertation, I study equilibria in marketing channels in a differentiated product duopoly consisting of a single common retailer and two exclusive retailers. Interactions due to retail prices and the level of unobservable promotional effort provided by the retailer(s) contribute to interdependence of marketing decisions. Both exclusive retailers and common retailers will be observed in equilibrium marketing channels. If linear (one-part) wholesale prices are used in transactions between manufacturers and retailers, the argument that a common retailer is a device to implement collusive outcomes among manufacturers is questionable. The negative cross elasticity of competing products results in a higher markup by a common retailer than an exclusive retailer. The higher retail prices with a common retailer results in less intensive competition. Utilizing a common retailer has the beneficial effect of softening the competition among manufacturers. If the promotional services are predatory, the common retailer provides lower levels of promotional services than would exclusive retailers. This has a negative impact on manufacturers' profits. A common retailer will be utilized when the products are close substitutes, promotional services are not very predatory, and the provision of promotional services is not very costly.
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