Increasing Channel Profit in the Sale of Durable Goods

Both time inconsistency and double marginalization are important issues in the sale of durable goods. In particular, when a durable goods manufacturer sells her product through a conventional retail store, the intrinsic double marginalization would alleviate time inconsistency to some extent. However, current research pays no attention on the interaction between both issues under multiple-retailer and manufacturer encroachment scenarios. To fill this gap, in this paper, we study these two channel structures in the sale of durable goods. Our analysis reveals that channel profit in the multiple-retailer structure is always greater than that under integration. On the other hand, the manufacturer encroachment structure can eliminate both bad effects without commitment under some circumstances and the whole channel is well coordinated.