Brand-Owners’ Exclusive Channel Strategies in Multitier Supply Chains: Effect of Contract Unobservability

Minghua Xiong and Xiaopo Zhuo ()
Additional contact information
Minghua Xiong: Business School, Foshan University, Foshan 528000, China
Xiaopo Zhuo: Business School, Sun Yat-sen University, Guangzhou 510275, China

Sustainability, 2023, vol. 15, issue 8, 1-23

Abstract: In multitier supply chains, brand-owners often form exclusive deals with downstream retailers or upstream suppliers. Therefore, the selection of exclusive channel strategies becomes a critical decision for brand owners, resulting in three typical structures: a flexible structure, an exclusive retailing-channel structure, and an exclusive purchasing-channel structure. This paper contributes to the literature by formulating these three representative channel structures in a three-tier supply chain. Both observable and unobservable contracts are considered in each structure. We build game-theoretical models and derive the equilibrium outcomes under observable and unobservable contracts. We find that the exclusive retailing channel is more beneficial for brand-owners, regardless of whether the contracts are observable or unobservable. Additionally, the exclusive retailing channel benefits the entire supply chain more than the exclusive purchasing channel when the level of channel substitutability is low (high) under contract observability (unobservability). With regard to the effect of contract unobservability, we find that it can benefit brand-owners when the level of channel substitutability is low, but it can harm them when the level of channel substitutability is high. Furthermore, we explore the effects of channel substitutability and demonstrate that brand-owners’ performance can be positively and negatively affected by the channel substitutability under contract unobservability. Our findings provide operational strategies for brand-owners to form exclusive channels in a multitier supply chain.

Keywords: contract unobservability; multitier supply chain; exclusive channels; channel competition; wholesale price (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2071-1050/15/8/7004/pdf (application/pdf)
https://www.mdpi.com/2071-1050/15/8/7004/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:15:y:2023:i:8:p:7004-:d:1129512

Access Statistics for this article

Sustainability is currently edited by Ms. Alexandra Wu

More articles in Sustainability from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().