The effects of demand uncertainty on channel structure

Wen Cao, Bo Jiang and Deming Zhou

European Journal of Operational Research, 2010, vol. 207, issue 3, 1471-1488

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.

Keywords: Retailing; Demand; uncertainty; Retail; channel; structure; Duopoly; competition (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:207:y:2010:i:3:p:1471-1488

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