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On Coordination of Dynamic Marketing Channels and Two-part Wholesale Tariff

Author

Listed:
  • Georges Zaccour

    (HEC Montréal)

Abstract

This paper considers a differential game model of a simple marketing channel formed of one manufacturer and one retailer. The manufacturer controls the advertising in the brand equity and the wholesale price and the retailer the promotion of the brand and its price to consumer. The paper shows that the result stated in a static game context, namely that the manufacturer can coordinate the channel through a two-part wholesale tariff, does not extend to a dynamic setting. The existence of such coordinated two-part tariff is next discussed under the restrictive assumptions of (i) full commitment of the manufacturer to the vertically-integrated solution and (ii) a retailer that cannot influence the evolution of the state (brand equity). In any event, the conclusion is that it is not in the best interest of the manufacturer to commit.

Suggested Citation

  • 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.
    • Handle: RePEc:sce:scecfa:250
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    Cited by:

    1. Martín-Herrán, Guiomar & Taboubi, Sihem, 2015. "Price coordination in distribution channels: A dynamic perspective," European Journal of Operational Research, Elsevier, vol. 240(2), pages 401-414.
    2. Lambertini, Luca, 2010. "Make vs buy in a monopoly with demand or cost uncertainty," Research in Economics, Elsevier, vol. 64(2), pages 101-109, June.
    3. L. Lambertini, 2013. "Coordinating Static and Dynamic Supply Chains with Advertising through Two-Part Tariffs," Working Papers wp874, Dipartimento Scienze Economiche, Universita' di Bologna.
    4. Steffen Jørgensen, 2011. "Intertemporal Contracting in a Supply Chain," Dynamic Games and Applications, Springer, vol. 1(2), pages 280-300, June.

    More about this item

    Keywords

    Differential Games; Marketing Channels;

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