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The effects of demand uncertainty on channel structure

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  • Cao, Wen
  • Jiang, Bo
  • Zhou, Deming

Abstract

Motivated by the business practice whereby some manufacturers open their own retail stores despite the existence of more efficient independent retailers, this paper examines the distribution channel choice of competing manufacturers under demand uncertainty and resale price maintenance. We characterize the conditions for the equilibrium channel structures. We find that (1) manufacturers tend to distribute products with more design attributes through their own retail stores, (2) manufacturers with highly substitutable products are more likely to use independent retailers, and (3) at least one manufacturer has more incentive to open its own retail stores when facing an increase of the market size asymmetry.

Suggested Citation

  • Cao, Wen & Jiang, Bo & Zhou, Deming, 2010. "The effects of demand uncertainty on channel structure," European Journal of Operational Research, Elsevier, vol. 207(3), pages 1471-1488, December.
    • Handle: RePEc:eee:ejores:v:207:y:2010:i:3:p:1471-1488
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    Cited by:

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    3. Lin Chen & Jin Peng & Zhibing Liu & Ruiqing Zhao, 2017. "Pricing and effort decisions for a supply chain with uncertain information," International Journal of Production Research, Taylor & Francis Journals, vol. 55(1), pages 264-284, January.
    4. Yang, Shilei & Shi, Victor & Jackson, Jonathan E., 2015. "Manufacturers׳ channel structures when selling asymmetric competing products," International Journal of Production Economics, Elsevier, vol. 170(PB), pages 641-651.
    5. Wang, Sujuan & Hu, Qiying & Liu, Weiqi, 2017. "Price and quality-based competition and channel structure with consumer loyalty," European Journal of Operational Research, Elsevier, vol. 262(2), pages 563-574.
    6. Bian, Junsong & Guo, Xiaolei & Li, Kevin W., 2018. "Decentralization or integration: Distribution channel selection under environmental taxation," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 113(C), pages 170-193.
    7. Youping Li & Jie Shuai, 2017. "Vertical separation with location–price competition," Journal of Economics, Springer, vol. 121(3), pages 255-266, July.
    8. Huihui Liu & Shuguang Sun & Ming Lei & Honghui Deng & G. Keong Leong, 2017. "The impact of retailers’ alliance on manufacturer’s profit in a dual-channel structure," International Journal of Production Research, Taylor & Francis Journals, vol. 55(22), pages 6592-6607, November.
    9. Xiaona Zheng & Luping Sun & Andy A. Tsay, 2018. "Distribution Channel Strategies and Retailer Collusion in a Supply Chain with Multiple Retailers," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 35(03), pages 1-27, June.

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