Could myopic pricing be a strategic choice in marketing channels? A game theoretic analysis
We identify the conditions under which a myopic pricing behavior could be a profit enhancing tool in the distribution channel. A channel member is myopic when he ignores the evolution of the retail prices when actual and past retail prices affect consumers' purchasing decisions. A differential game is formulated where channel members control transfer and retail prices. We start by examining a bilateral monopoly, and then introduce competition at the manufacturing level. The competing manufacturers play à la Nash and can be both myopic, both farsighted, or one myopic while the other is farsighted. We show that, for a bilateral monopoly, myopia enhances total channel profit when the effect of the reference price is small enough. This remains true under competition at the manufacturing level when products are differentiated enough.
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
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.:
- William A. Brock & Cars H. Hommes, 1997.
"A Rational Route to Randomness,"
Econometric Society, vol. 65(5), pages 1059-1096, September.
- Frank M. Bass & Alain V. Bultez, 1982. "Technical Note—A Note on Optimal Strategic Pricing of Technological Innovations," Marketing Science, INFORMS, vol. 1(4), pages 371-378.
- Jorgensen, Steffen & Zaccour, Georges, 2003. "Channel coordination over time: incentive equilibria and credibility," Journal of Economic Dynamics and Control, Elsevier, vol. 27(5), pages 801-822, March.
- Bruce Robinson & Chet Lakhani, 1975. "Dynamic Price Models for New-Product Planning," Management Science, INFORMS, vol. 21(10), pages 1113-1122, June.
- Praveen K. Kopalle & Carl F. Mela & Lawrence Marsh, 1999. "The Dynamic Effect of Discounting on Sales: Empirical Analysis and Normative Pricing Implications," Marketing Science, INFORMS, vol. 18(3), pages 317-332.
- Fershtman, Chaim & Kamien, Morton I, 1987. "Dynamic Duopolistic Competition with Sticky Prices," Econometrica, Econometric Society, vol. 55(5), pages 1151-64, September.
- Joseph J. Spengler, 1950. "Vertical Integration and Antitrust Policy," Journal of Political Economy, University of Chicago Press, vol. 58, pages 347.
- Pradeep K. Chintagunta & Vithala R. Rao, 1996. "Pricing Strategies in a Dynamic Duopoly: A Differential Game Model," Management Science, INFORMS, vol. 42(11), pages 1501-1514, November.
- S. Chan Choi, 1991. "Price Competition in a Channel Structure with a Common Retailer," Marketing Science, INFORMS, vol. 10(4), pages 271-296.
- Jorgensen, Steffen & Taboubi, Sihem & Zaccour, Georges, 2003. "Retail promotions with negative brand image effects: Is cooperation possible?," European Journal of Operational Research, Elsevier, vol. 150(2), pages 395-405, October.
When requesting a correction, please mention this item's handle: RePEc:eee:dyncon:v:33:y:2009:i:9:p:1699-1718. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
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.