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The Marketing Channel as an Equilibrium Set of Contracts

Author

Listed:
  • Pinhas Zusman

    (Hebrew University and The World Bank, Washington, D.C.)

  • Michael Etgar

    (Hebrew University)

Abstract

Nash bargaining theory and recent developments in economic contract theory are employed in the analysis of the marketing channels. Individual dyadic contracts involving payment schedules between members of a simple 3 level channel are investigated with particular reference to monitoring problems and intrachannel power relations. The interrelations between individual contracts are examined and the equilibrium set of contracts constituting the channel derived. The performance of the channel in terms of risk sharing, allocative efficiency and the distribution of gains is then evaluated. It is found that the risk aversion of channel members and the cost of monitoring and enforcement affect channel efficiency, and that under certain types of interdependencies and externalities, the nature of the power structure is crucial to channel efficiency.

Suggested Citation

  • Pinhas Zusman & Michael Etgar, 1981. "The Marketing Channel as an Equilibrium Set of Contracts," Management Science, INFORMS, vol. 27(3), pages 284-302, March.
    • Handle: RePEc:inm:ormnsc:v:27:y:1981:i:3:p:284-302
    DOI: 10.1287/mnsc.27.3.284
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    Citations

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    Cited by:

    1. Hongyan Shi & Yunchuan Liu & Nicholas C. Petruzzi, 2013. "Consumer Heterogeneity, Product Quality, and Distribution Channels," Management Science, INFORMS, vol. 59(5), pages 1162-1176, May.
    2. Minakshi Trivedi, 1998. "Distribution Channels: An Extension of Exclusive Retailership," Management Science, INFORMS, vol. 44(7), pages 896-909, July.
    3. Hau L. Lee & V. Padmanabhan & Terry A. Taylor & Seungjin Whang, 2000. "Price Protection in the Personal Computer Industry," Management Science, INFORMS, vol. 46(4), pages 467-482, April.
    4. Zhu, Stuart X., 2015. "Integration of capacity, pricing, and lead-time decisions in a decentralized supply chain," International Journal of Production Economics, Elsevier, vol. 164(C), pages 14-23.
    5. Chongqi Wu & Kunpeng Li & Tianqin Shi, 2017. "Supply chain coordination with two-part tariffs under information asymmetry," International Journal of Production Research, Taylor & Francis Journals, vol. 55(9), pages 2575-2589, May.
    6. Heide, Jan B & Dutta, Shantanu & Bergen, Mark, 1998. "Exclusive Dealing and Business Efficiency: Evidence from Industry Practice," Journal of Law and Economics, University of Chicago Press, vol. 41(2), pages 387-407, October.
    7. Zhang, Rong & Liu, Bin & Wang, Wenliang, 2012. "Pricing decisions in a dual channels system with different power structures," Economic Modelling, Elsevier, vol. 29(2), pages 523-533.
    8. L. Lambertini, 2013. "Coordinating Static and Dynamic Supply Chains with Advertising through Two-Part Tariffs," Working Papers wp874, Dipartimento Scienze Economiche, Universita' di Bologna.
    9. Timothy W. McGuire & Richard Staelin, 2008. "An Industry Equilibrium Analysis of Downstream Vertical Integration," Marketing Science, INFORMS, vol. 27(1), pages 115-130, 01-02.
    10. Barry Alan Pasternack, 2008. "Optimal Pricing and Return Policies for Perishable Commodities," Marketing Science, INFORMS, vol. 27(1), pages 133-140, 01-02.
    11. J. He & K. S. Chin & J. B. Yang & D. L. Zhu, 2006. "Return Policy Model of Supply Chain Management for Single-Period Products," Journal of Optimization Theory and Applications, Springer, vol. 129(2), pages 293-308, May.
    12. Joan Le Goff, 1996. "Contexte juridique et stratégies relationnelles : le cas des systèmes de distribution de produits industriels," Post-Print hal-03253871, HAL.
    13. Sabina Riboldazzi, 2005. "Global Retailers and Competitive Customer Value," Symphonya. Emerging Issues in Management, Niccolò Cusano University, issue 2 Over-Su.
    14. Gangshu (George) Cai & Yue Dai & Sean X. Zhou, 2012. "Exclusive Channels and Revenue Sharing in a Complementary Goods Market," Marketing Science, INFORMS, vol. 31(1), pages 172-187, January.
    15. Abel P. Jeuland & Steven M. Shugan, 2008. "Managing Channel Profits," Marketing Science, INFORMS, vol. 27(1), pages 52-69, 01-02.
    16. Musso, Fabio, 1999. "Relazioni di canale e strategie di acquisto delle imprese commerciali. Potere e stabilità nella grande distribuzione britannica [Channel Relationships and Buying Strategies of British Large Retaile," MPRA Paper 58508, University Library of Munich, Germany, revised 1999.
    17. Lau, Hon-Shiang & Lau, Amy Hing-Ling, 1999. "Manufacturer's pricing strategy and return policy for a single-period commodity," European Journal of Operational Research, Elsevier, vol. 116(2), pages 291-304, July.

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