This paper investigates two coordination mechanisms in a simple distribution channel: 1) the manufacturer's suggested retail price (MSRP) and 2) the minimum advertised price (MAP). With a MSRP, the retailer can engage in a price discount policy to maintain control of the selling price. With a MAP, the manufacturer pays part of the retailer's advertising expenses. Our results illustrate that when the consumer's price sensitivity is lower than their advertising sensitivity, both players prefer a MAP. Otherwise, the adoption of a MSRP is only profit-Pareto-improving when the retailer's transfer price is large. We contrast the findings with a distribution channel that adopts a classical wholesale price contract (WPC). When compared to a classical WPC, firms are indifferent between selecting a WPC or a MSRP, while they prefer a MAP to a WPC. We explore two competitive scenarios to investigate the impact of competition on the preferences among these contracts.

Channel coordination with a manufacturer controlling the price and the effect of competition / Sacco, A; De Giovanni, P. - In: JOURNAL OF BUSINESS RESEARCH. - ISSN 0148-2963. - 96:(2019), pp. 97-114. [10.1016/j.jbusres.2018.09.001]

Channel coordination with a manufacturer controlling the price and the effect of competition

De Giovanni P
2019

Abstract

This paper investigates two coordination mechanisms in a simple distribution channel: 1) the manufacturer's suggested retail price (MSRP) and 2) the minimum advertised price (MAP). With a MSRP, the retailer can engage in a price discount policy to maintain control of the selling price. With a MAP, the manufacturer pays part of the retailer's advertising expenses. Our results illustrate that when the consumer's price sensitivity is lower than their advertising sensitivity, both players prefer a MAP. Otherwise, the adoption of a MSRP is only profit-Pareto-improving when the retailer's transfer price is large. We contrast the findings with a distribution channel that adopts a classical wholesale price contract (WPC). When compared to a classical WPC, firms are indifferent between selecting a WPC or a MSRP, while they prefer a MAP to a WPC. We explore two competitive scenarios to investigate the impact of competition on the preferences among these contracts.
Distribution channel, Manufacturer's suggested retail price, Minimum advertised price, Advertising, Competition
File in questo prodotto:
File Dimensione Formato  
2 Channel coordination with a manufacturer controlling the price and the.pdf

Solo gestori archivio

Tipologia: Versione dell'editore
Licenza: DRM non definito
Dimensione 4.02 MB
Formato Adobe PDF
4.02 MB Adobe PDF   Visualizza/Apri
Pubblicazioni consigliate

Caricamento pubblicazioni consigliate

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11385/190316
Citazioni
  • Scopus 13
  • ???jsp.display-item.citation.isi??? 13
social impact