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The strategic effect of retailers' in‐store advertising services under product variety competition

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  • Haruki Kobayashi
  • Nobuo Matsubayashi

Abstract

We study a retailer service model of in‐store advertising, in which a neutral retailer provides product information to consumers for free but charges manufacturers. Our results show that the retailer's optimal pricing induces the manufacturers to decrease the number of items they offer. Nevertheless, this relaxes the competition between the manufacturers so that they benefit from using the in‐store service, unless the cost of communicating with consumers about the between‐firm products is lower. Furthermore, the service can be made socially beneficial by reducing the inefficiency resulting from an excessive number of items when manufacturers are not well differentiated.

Suggested Citation

  • Haruki Kobayashi & Nobuo Matsubayashi, 2019. "The strategic effect of retailers' in‐store advertising services under product variety competition," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 40(3), pages 232-242, April.
    • Handle: RePEc:wly:mgtdec:v:40:y:2019:i:3:p:232-242
    DOI: 10.1002/mde.2994
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    Cited by:

    1. Ruifeng Gong & Jian Xue & Ruli Liu & Jinhua Zhou & Laijun Zhao, 2022. "A closed‐loop supply chain decision model considering corporate social responsibility and value‐added services," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 1704-1720, September.

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