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Supplier encroachment and retailer effort

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  • Noriaki Matsushima
  • Tomomichi Mizuno

Abstract

We propose simple dual-channel models in which an upstream manufacturer trades with a downstream retailer that is able to engage in cost-reducing activities. When the manufacturer determines whether to encroach on the downstream market after observing the retailer's effort level, the threat of manufacturer encroachment can work as a disciplinary device to induce the retailer to aggressively engage in cost reductions, after which the manufacturer refrains from encroaching further on the downstream market. The disciplinary device is more likely to improve consumer welfare and social welfare, although the encroachment itself can harm social welfare.

Suggested Citation

  • Noriaki Matsushima & Tomomichi Mizuno, 2018. "Supplier encroachment and retailer effort," ISER Discussion Paper 1027, Institute of Social and Economic Research, Osaka University.
  • Handle: RePEc:dpr:wpaper:1027
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    File URL: http://www.iser.osaka-u.ac.jp/library/dp/2018/DP1027.pdf
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    References listed on IDEAS

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    1. Weon Sang Yoo & Eunkyu Lee, 2011. "Internet Channel Entry: A Strategic Analysis of Mixed Channel Structures," Marketing Science, INFORMS, vol. 30(1), pages 29-41, 01-02.
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    4. Noriaki Matsushima & Tomomichi Mizuno & Cong Pan, 2018. "A manufacturer's incentive to open its direct channel and its impact on welfare," ISER Discussion Paper 1026, Institute of Social and Economic Research, Osaka University.
    5. Rohm, Andrew J. & Swaminathan, Vanitha, 2004. "A typology of online shoppers based on shopping motivations," Journal of Business Research, Elsevier, vol. 57(7), pages 748-757, July.
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    7. Nanda Kumar & Ranran Ruan, 2006. "On manufacturers complementing the traditional retail channel with a direct online channel," Quantitative Marketing and Economics (QME), Springer, vol. 4(3), pages 289-323, September.
    8. Matsui, Kenji, 2016. "Asymmetric product distribution between symmetric manufacturers using dual-channel supply chains," European Journal of Operational Research, Elsevier, vol. 248(2), pages 646-657.
    9. Anil Arya & Brian Mittendorf & David E. M. Sappington, 2007. "The Bright Side of Supplier Encroachment," Marketing Science, INFORMS, vol. 26(5), pages 651-659, 09-10.
    10. Sarv Devaraj & Ming Fan & Rajiv Kohli, 2002. "Antecedents of B2C Channel Satisfaction and Preference: Validating e-Commerce Metrics," Information Systems Research, INFORMS, vol. 13(3), pages 316-333, September.
    11. Tomomichi Mizuno, 2012. "Direct Marketing in Oligopoly," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 21(2), pages 373-397, June.
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