Retailer voluntary investment against a threat of manufacturer encroachment

Jumpei Hamamura () and Yusuke Zennyo
Additional contact information
Jumpei Hamamura: Momoyama Gakuin University

Marketing Letters, 2021, vol. 32, issue 4, No 3, 379-395

Abstract: Abstract To elucidate supply chain cooperation between a manufacturer and a retailer, this study examines a model in which the retailer makes voluntary investments to reduce the marginal production cost of the manufacturer. The manufacturer is allowed to introduce a direct selling channel in addition to the indirect channel through the retailer (i.e., manufacturer encroachment), which however dampens the retailers’ investment incentives. The retailer can leverage its voluntary investments as a means of deterring manufacturer encroachment. We demonstrate that manufacturer encroachment is strategically deterred when the retailer’s cost-reduction technology is sufficiently effective. This strategic encroachment deterrence encourages the retailer to invest more, but it narrows the variety of channels from which consumers can select. When the latter effect dominates the former effect, consumer surplus declines with strategic encroachment deterrence.

Keywords: Supply chain management; Manufacturer encroachment; Strategic encroachment deterrence; Supply chain cooperation; Cost-reducing voluntary investments (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://link.springer.com/10.1007/s11002-021-09575-7 Abstract (text/html)
Access to full text is restricted to subscribers.

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:kap:mktlet:v:32:y:2021:i:4:d:10.1007_s11002-021-09575-7

Ordering information: This journal article can be ordered from
http://www.springer. ... etailsPage=societies

DOI: 10.1007/s11002-021-09575-7

Access Statistics for this article

Marketing Letters is currently edited by Joel Steckel and Peter Golder

More articles in Marketing Letters from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().