Journées de l'optimisation 2007 Optimizations days

A dual marketing channel formed by a manufacturer and his retailer is analyzed. The manufacturer sells his product indirectly through the retailer and directly through his own store, i.e. his website. Both players are assumed to be profit maximizers in a Hotelling model. The manufacturer¹s decision variables are the wholesale price and the location/differentiation of the online store. On the other hand the retailer sets the retail price. The optimal strategies are identified and analyzed. We derive managerial conclusions.

The paper investigates the impact of a retailer's myopic behavior on the outcomes for channel members. Myopia refers to the lack of recognition that today's decision has an impact on tomorrow's outcome, and amounts to discounting future rewards at an infinite rate. The problem takes place in a marketing channel where a monopolist manufacturer controls the transfer price and the advertising rate designed to build brand equity. The brand is distributed via a unique retailer that controls the retail margin, which affects the retail price. We consider that the retail price plays a dual role, namely, as a driver of demand and a determinant of the market potential of the brand. The retailer has the strategic choice of adopting a myopic or a far-sighted behavior, depending on the outcomes of both scenarios. Our objective is to address the following research questions: 1.Is it beneficial to the retailer to behave myopically? 2.Is it preferable for the manufacturer to deal with a myopic retailer? 3.How does a retailer's myopia affect pricing and advertising strategies? The problem is modelled as a differential game that takes place in a bilateral monopoly. Feedback Nash equilibria are sought for the two scenarios, i.e., with a myopic retailer and a far-sighted one. Since the equilibria turns out to be not amenable to a qualitative analysis, we design a series of simulations to analyze the impact of key model's parameters on strategies and outcomes, as well as to assess the impact of myopia on them.

Most past studies of store brands ignored store competition and focused on limited interactions among channel members. This research seeks to extend the literature by considering various channel leadership structures and retail competition in a channel of a single national brand manufacturer and two competing store brand retailers that also carry the national brand. Besides the variety in vertical price leadership between the national brand manufacturer and the store brand retailers, we particularly investigate the role of horizontal price leadership between two store brand retailers. We find that the two competing retailers are better-off when they practice price leadership between them. In addition, consumers are better-off when no leadership exists between the three channel members and worst-off under the manufacturer’s leadership. Total channel profits are the highest when no leadership is practiced and larger when the channel leaders are the store brand retailers rather than the national brand manufacturer.