Supplier Encroachment in a Nonexclusive Reselling Channel

Parshuram Hotkar () and Stephen M. Gilbert ()
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Parshuram Hotkar: Indian School of Business, Hyderabad, Telangana 500032, India
Stephen M. Gilbert: McCombs School of Business, University of Texas at Austin, Austin, Texas 78712

Management Science, 2021, vol. 67, issue 9, 5821-5837

Abstract: We consider a setting in which a nonexclusive reseller procures partially substitutable products from two suppliers, one of whom introduces a direct channel. We find that the presence of the second supplier alters many of the existing results about the interactions between a reseller and an encroaching supplier. For instance, the reseller’s and the supply chain’s benefit from the direct channel disappears when the product substitutability is sufficiently large. In addition, when the reseller is nonexclusive, the encroaching supplier may either sell exclusively through its direct channel even when that channel is less efficient than the reselling channel, or sell through both channels even when its direct channel is more efficient than the reselling channel. Neither of these would occur in an exclusive reselling environment with only one supplier.

Keywords: direct channel; game theory; supply-chain interactions (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (14)

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