Abstract
This paper investigates a dual exclusive channel model in which each manufacturer distributes its goods through a single exclusive retailer, but two goods are substitute. The decision rule between two channels is Nash game in Case 1, while it is Stackelberg game in Case 2. From manufacturer Stackelberg (MS), retailer Stackelberg (RS), and Nash game (VN) theoretic perspectives, nine game models are developed to examine the effect of product substitutability and relative channel status on pricing decisions at both horizontal competition and vertical competition levels. The analysis suggests that the type of price leadership scenarios, the level of product substitutability, and the relative channel status play a significant role in decision making. For instance, in case 1, the symmetric leadership (two manufacturers or two retailers are leaders) is always the dominant strategy and equilibrium for either two manufacturers or two retailers regardless of product substitutability and relative channel status. Nevertheless, the asymmetric leadership may lead channel members to encounter a prisoner’s dilemma if the relative channel status is small. By contrast, in Case 2, the symmetric leadership is not the unique dominant strategy for either two manufacturers or two retailers. In contrast to many earlier results, we also show that whether the first-mover and the late-mover advantages exist, depending on the level of related channel status.
Highlights
Academic Editor: Maria Alessandra Ragusa is paper investigates a dual exclusive channel model in which each manufacturer distributes its goods through a single exclusive retailer, but two goods are substitute. e decision rule between two channels is Nash game in Case 1, while it is Stackelberg game in Case 2
From manufacturer Stackelberg (MS), retailer Stackelberg (RS), and Nash game (VN) theoretic perspectives, nine game models are developed to examine the effect of product substitutability and relative channel status on pricing decisions at both horizontal competition and vertical competition levels. e analysis suggests that the type of price leadership scenarios, the level of product substitutability, and the relative channel status play a significant role in decision making
We mainly explore the impacts of asymmetric price leadership, asymmetric relative channel status, and product substitutability on the pricing decision of two cases
Summary
As a benchmark to evaluate pricing decisions under different price leadership scenarios, we first examine a dual exclusive channel without horizontal Stackelberg competition. ere are nine possible price leadership scenarios under Case 1. Similar to eorem 1, comparing the equilibrium profits of manufacturer 1, retailer 1, and channel 1 of all price leadership scenarios provides us the following proposition. Proposition 1 is similar to the results of symmetric channel status case, it shows that Scenario NMM/NMR (NRR/NRM) always results in higher profit for the manufacturer 1 (retailer 1) regardless of the asymmetric relative channel status and the product substitutability. From the horizontal competition perspective, the symmetric leadership is always the dominant strategy and equilibrium for either two manufacturers or two retailers regardless of the asymmetric related channel status and the product substitutability.
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