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A Theory of Channel Price Promotions

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Author Info
Gerstner, Eitan
Hess, James D
Abstract

Manufacturers can stimulate sales by a temporary wholesale price reduction for the retailer, a rebate directed toward consumers, or a combination of both. The trade-offs between these price promotions are analyzed, providing insights about their roles, profitability, and welfare properties. Retailers' rebates are also studied. While price discrimination is a common explanation for rebates to consumers, when a product is sold through a distribution channel, the manufacturer may also use rebates to motivate retail participation in the promotion. This explains why rebates may be offered even when all consumers use them and price discrimination does not occur. Copyright 1991 by American Economic Association.

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Publisher Info
Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 81 (1991)
Issue (Month): 4 (September)
Pages: 872-86
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Handle: RePEc:aea:aecrev:v:81:y:1991:i:4:p:872-86

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  1. Jin-Li Hu & Yu-Hsiu Chiou & Hong Hwang, 2004. "Coupons and price discrimination in vertically-correlated markets," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 25(1), pages 29-40. [Downloadable!]
  2. Timothy J. Richards, 2006. "Sales by multi-product retailers," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 27(4), pages 261-277. [Downloadable!]
  3. Cotterill, Ronald W., 1999. "Continuing Concentration in Food Industries Globally: Strategic Challenges to an Unstable Status Quo," Research Reports 25190, University of Connecticut, Food Marketing Policy Center. [Downloadable!]
  4. Marius Schwartz & Daniel R. Vincent, 2006. "The No Surcharge Rule and Card User Rebates: Vertical Control by a Payment Network," Review of Network Economics, Concept Economics, vol. 5(1), pages 72-102, March. [Downloadable!]
  5. Cotterill, Ronald W., 1999. "Continuing Concentration in the U.S.: Strategic Challenges to an Unstable Status Quo," Research Reports 25165, University of Connecticut, Food Marketing Policy Center. [Downloadable!]
  6. Cotterill, Ronald W., 2000. "Dynamic Explanations of Industry Structure and Performance," Research Reports 25224, University of Connecticut, Food Marketing Policy Center. [Downloadable!]
  7. Connor, John M., 1997. "Couponing As A Horizontal And Vertical Strategy: Theory And Effects," Working Papers 14344, University of Minnesota, The Food Industry Center. [Downloadable!]
  8. Chyi-Mei Chen & Shan-Yu Chou & Lu Hsiao & I-Huei Wu, 2009. "Private labels and new product development," Marketing Letters, Springer, vol. 20(3), pages 227-243, September. [Downloadable!] (restricted)
  9. Cotterill, Ronald W., 1998. "Estimation of Cost Pass Through to Michigan Consumers in the ADM Price Fixing Case," Research Reports 25148, University of Connecticut, Food Marketing Policy Center. [Downloadable!]
  10. Kuiper, W. Erno & Lutz, Clemens & van Tilburg, Aad, 2002. "Vertical Price Leadership on Local Maize Markets in Benin," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24886, European Association of Agricultural Economists. [Downloadable!]
  11. Meghan Busse & Florian Zettelmeyer & Jorge Silva-Risso, 2004. "$1000 Cash Back: Asymmetric Information in Auto Manufaturer Promotions," NBER Working Papers 10887, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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