Coordinating Static and Dynamic Supply Chains with Advertising through Two-Part Tariffs
AbstractZaccour (2008) investigates the behaviour of a marketing channel where firms invest in advertising to increase brand equity, showing that an exogenous twopart tariff cannot be used to replicate the vertically integrated monopolist’s performance. I revisit the same model proving the existence of a multiplicity of franchising contracts taht can do the job. In particular, I set out by illustrating an optimal two-part tariff specified as a linear function of the upstream firm’s advertising effort, performing this task both in the static and in the dynamic game. then, I show that an analogous result emerges (i) in the static game by writing the fixed component of the two-part tariff as a non-linear function of the manufacturer’s advertising effort; and (ii) by using a contract which is linear in the brand equity, in the dynamic case.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number wp874.
Date of creation: Mar 2013
Date of revision:
Contact details of provider:
Postal: Piazza Scaravilli, 2, and Strada Maggiore, 45, 40125 Bologna
Phone: +39 051 209 8019 and 2600
Fax: +39 051 209 8040 and 2664
Web page: http://www.dse.unibo.it
More information through EDIRC
Find related papers by JEL classification:
- L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
- M31 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Marketing
- M37 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Advertising
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-04-13 (All new papers)
- NEP-COM-2013-04-13 (Industrial Competition)
- NEP-MIC-2013-04-13 (Microeconomics)
- NEP-MKT-2013-04-13 (Marketing)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- R. Cellini & L. Lambertini, 2002.
"A Differential Oligopoly Game with Differentiated Goods and Sticky Prices,"
440, Dipartimento Scienze Economiche, Universita' di Bologna.
- Cellini, Roberto & Lambertini, Luca, 2007. "A differential oligopoly game with differentiated goods and sticky prices," European Journal of Operational Research, Elsevier, vol. 176(2), pages 1131-1144, January.
- Riordan, M.H., 1996.
"Anticompetitive Vertical Integration by a Dominant Firm,"
64, Boston University - Industry Studies Programme.
- Riordan, Michael H, 1998. "Anticompetitive Vertical Integration by a Dominant Firm," American Economic Review, American Economic Association, vol. 88(5), pages 1232-48, December.
- Michael Riordan, 1996. "Anticompetitive Vertical Integration by a Dominant Firm," Papers 0064, Boston University - Industry Studies Programme.
- Georges Zaccour, 2006. "On Coordination of Dynamic Marketing Channels and Two-part Wholesale Tariff," Computing in Economics and Finance 2006 250, Society for Computational Economics.
- Jagmohan Raju & Z. John Zhang, 2005. "Channel Coordination in the Presence of a Dominant Retailer," Marketing Science, INFORMS, vol. 24(2), pages 254-262, February.
- Oliver Hart & John Moore, 1988.
"Property Rights and the Nature of the Firm,"
495, Massachusetts Institute of Technology (MIT), Department of Economics.
- Grout, Paul A, 1984. "Investment and Wages in the Absence of Binding Contracts: A Nash Bargining Approach," Econometrica, Econometric Society, vol. 52(2), pages 449-60, March.
- Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
- R. Cellini & L. Lambertini, 2000. "Feedback and Open-Loop Solutions," Working Papers 393, Dipartimento Scienze Economiche, Universita' di Bologna.
- Slade, M.E., 1989.
"What Does An Oligopoly Maximize?,"
89a14, Universite Aix-Marseille III.
- Gérard P. Cachon & Martin A. Lariviere, 2005. "Supply Chain Coordination with Revenue-Sharing Contracts: Strengths and Limitations," Management Science, INFORMS, vol. 51(1), pages 30-44, January.
- D. Dragone & L. Lambertini & G. Leitmann & A. Palestini, 2008. "Hamiltonian potential functions for differential games," Working Papers 644, Dipartimento Scienze Economiche, Universita' di Bologna.
- Dockner, Engelbert, 1988. "On the relation between dynamic oligopolistic competition and long-run competitive equilibrimn," European Journal of Political Economy, Elsevier, vol. 4(1), pages 47-64.
- Pinhas Zusman & Michael Etgar, 1981. "The Marketing Channel as an Equilibrium Set of Contracts," Management Science, INFORMS, vol. 27(3), pages 284-302, March.
- Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
- Joskow, Paul L, 1987. "Contract Duration and Relationship-Specific Investments: Empirical Evidence from Coal Markets," American Economic Review, American Economic Association, vol. 77(1), pages 168-85, March.
- Chen, Kebing & Xiao, Tiaojun, 2009. "Demand disruption and coordination of the supply chain with a dominant retailer," European Journal of Operational Research, Elsevier, vol. 197(1), pages 225-234, August.
- R. Canan Savaskan & Shantanu Bhattacharya & Luk N. Van Wassenhove, 2004. "Closed-Loop Supply Chain Models with Product Remanufacturing," Management Science, INFORMS, vol. 50(2), pages 239-252, February.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Luca Miselli).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.