A shelf-space-dependent wholesale price when manufacturer and retailer brands compete |
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Authors: | Nawel Amrouche Georges Zaccour |
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Affiliation: | (1) School of Business, Public Administration and Information Sciences, Long Island University, Long Island, NY, USA;(2) Chair in Game Theory and Management, GERAD, HEC Montréal, Montréal, QC, Canada |
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Abstract: | We propose a game-theoretic model involving the manufacturer of a national brand and a retailer selling her private label
along with the national brand. The retailer can use either a differentiation strategy or an imitation strategy for offering
her store brand. We consider two cases: the benchmark case, where both players have symmetric information and play a Nash
game, and the incentive case, where the national brand’s manufacturer, acting as a leader, offers an incentive to the retailer
in order to benefit from a larger proportion of the shelf space, which ultimately increases her own profit. By comparing both
situations, we attempt to derive the conditions under which it is profitable for the manufacturer to implement such an incentive
strategy and investigate if the results are idiosyncratic to the PL concept. These conditions are fourfold, and include the
private label’s image, the price competition between the national brand and the private label, the transfer price level and
the shelf-space allocated to the national brand in the benchmark case. |
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Keywords: | Shelf-space allocation Marketing channel Private labels Wholesale pricing Game theory Nash and Stackelberg equilibria |
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