Abstract
Rebate is a traditional type of promotion, and it can benefit manufacturers and retailers with expanded demands. However, the impact of leadership strategy in rebate competition on supply chain members and rebate decision is still somewhat unclear. Our paper focuses on a horizontal competition with respect to both rebate and leadership between two manufacturers selling substitutable products through a common retailer to consumers who are heterogeneous in their price sensitivity. Furthermore, we investigate the impacts of leadership strategy on profits and study rebate decision under different strategies. Our research indicates that Bertrand-Nash game benefits the retailer, but hurts manufacturers, while Stackelberg game benefits manufacturers but hurts the retailer, which shows no difference from previous studies. In addition, the sequential-move Stackelberg game could eliminate the classic prisoners’ dilemma in rebate decision, which is also influenced by fixed cost control.
Highlights
Rebate is a very fashionable type of sale promotion in consumers’ daily lives
We investigate the impacts of leadership strategy on profits and study rebate decision under different strategies
From Propositions 6 and 7, and the above discussion, our results show that leadership strategy has a great impact on manufacturers and retailer; the Bertrand-Nash game could damage the manufacturers’ profits compared with the sequential-move Stackelberg game, whereas benefiting the retailer
Summary
Rebate is a very fashionable type of sale promotion in consumers’ daily lives. Companies offer rebates as a promotion, especially in electronic and automotive industries for several reasons. We examined how the leadership strategies affected the profits of supply chain members and rebate decisions from a horizontal competitive perspective referring to two manufacturers and one retailer with certain demand. To address these questions, we developed a multistage game model, in which two manufacturers sell substitutable products through a common retailer to consumers who are heterogeneous in their price sensitivity. We demonstrated that leadership strategy has an opposite impact on profits for manufacturers and retailer in rebate competition, which coincides with previous studies, and in most cases, manufacturers have the second-move advantages to decide the wholesale prices and rebate values. Sequential-move Stackelberg strategy could eliminate the classic prisoners’ dilemma scenario in rebate decision, which is influenced by fixed cost control
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