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Launching new products through exclusive sales channels

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  • Andritsos, Dimitrios A.
  • Tang, Christopher S.

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.

Suggested Citation

  • Andritsos, Dimitrios A. & Tang, Christopher S., 2010. "Launching new products through exclusive sales channels," European Journal of Operational Research, Elsevier, vol. 204(2), pages 366-375, July.
    • Handle: RePEc:eee:ejores:v:204:y:2010:i:2:p:366-375
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    References listed on IDEAS

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    Cited by:

    1. Chen, Jen-Yi & Dada, Maqbool & Hu, Qiaohai (Joice), 2017. "Flexible procurement contracts for competing retailers," European Journal of Operational Research, Elsevier, vol. 259(1), pages 130-142.
    2. Kim, Nayeong & Lee, Dongmin & Cho, Seonghwan & Moon, Junghoon, 2023. "The effect of exclusive distribution on the sales of ready-made meals in online retail," Journal of Retailing and Consumer Services, Elsevier, vol. 75(C).
    3. Gielens, Katrijn & Gijsbrechts, Els & Dekimpe, Marnik G., 2014. "Gains and losses of exclusivity in grocery retailing," International Journal of Research in Marketing, Elsevier, vol. 31(3), pages 239-252.

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