Launching new products through exclusive sales channels

Dimitrios Andritsos and Christopher S. Tang
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Dimitrios Andritsos: Anderson Graduate School of Management, UCLA - UCLA - University of California [Los Angeles] - UC - University of California
Christopher S. Tang: Anderson Graduate School of Management, UCLA - UCLA - University of California [Los Angeles] - UC - University of California

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Abstract: When launching a new product, a manufacturer usually sells it through competing retailers under non-exclusive arrangements. Recently, many new products (cellphones, electronics, toys, etc.) are sold through a single sales channel via an exclusive arrangement. In this paper we present two separate models that examine these two arrangements. Each model is based on a Stackelberg game in which the manufacturer acts as the leader by setting the wholesale price and the retailers act as the followers by choosing their retail prices. For each model, we solve the Stackelberg game by determining the manufacturer's optimal wholesale price and each retailer's optimal retail price in equilibrium. Then we examine the conditions under which the manufacturer should sell the new product through an exclusive retailer. In addition, we examine the impact of postponing the wholesale price decision and the impact of demand uncertainty on the manufacturer's optimal profit under both arrangements.

Keywords: Marketing/manufacturing interfaces; Retail competition; Channel competition (search for similar items in EconPapers)
Date: 2010-07-16
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Citations: View citations in EconPapers (3)

Published in European Journal of Operational Research, 2010, 204 (2), pp.366-375. ⟨10.1016/j.ejor.2009.11.002⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00624045

DOI: 10.1016/j.ejor.2009.11.002

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