Strategic Decentralization and Channel Coordination |
| |
Authors: | Desai Preyas Koenigsberg Oded Purohit Devavrat |
| |
Institution: | (1) The Fuqua School of Business, Duke University, Durham, NC, 27708;(2) Graduate School of Business, Columbia University, 3022 Broadway, New York, NY, 10027;(3) The Fuqua School of Business, Duke University, Durham, NC, 27708 |
| |
Abstract: | In this paper, we show that under certain conditions, strategic decentralization through the addition of a retailer in the distribution channel can increase a manufacturer's profits. The specific case on which we focus is the quantity coordination (double marginalization) problem for a manufacturer selling durable goods in a two-period setting. We show that the standard solution that coordinates a channel for non-durables does not coordinate the channel for durables. In particular, even though a manufacturer can achieve channel coordination by offering per-period, two-part fees, the equilibrium wholesale price in the first period is strictly above the manufacturer's marginal cost. This is in stark contrast to the two-part solution for non-durables where the equilibrium wholesale price is equal to marginal cost. We also identify a strategy that solves both the channel coordination and the Coase problem associated with durable goods. In this strategy, at the beginning of period 1, the manufacturer writes a contract with the retailer specifying a fixed fee and wholesale prices covering both periods. We show that by adding a retailer and using this contract, the manufacturer makes higher profits than it could if it were to sell directly to consumers. |
| |
Keywords: | durable goods channels of distribution incentives |
本文献已被 SpringerLink 等数据库收录! |
|