Asia Marketing Journal

Korean Marketing Association (한국마케팅학회)
권호 표지
DOI QR코드

DOI QR Code

Effects of Channel Structure on the Quality Competition of Exclusively Distributed Products

  • Received : 2017.09.14
  • Accepted : 2018.01.28
  • Published : 2018.01.31
Download PDF
⟨ Previous Next ⟩

Abstract

This study investigates the effects of the distribution channel structure on quality decisions under duopoly competition. I considers a set-up in which two retailers compete on product quality and retail price. In the set-up, the integrated retailer has the power to determine the quality of its exclusive product, while the decentralized retailer does not. For the decentralized retailer, the supplier determines product quality. I find that asymmetric pairs of a decentralized channel by one retailer and an integrated channel by the other retailer can be a Nash equilibrium in a simultaneous-channel-choice model. The two retailers select different levels of quality, and this quality competition benefits retailers by softening price competition. In a sequential-channel-choice model, I find that the leader can obtain a first-mover advantage. From the perspective of the supplier, which can decide the distribution channel structure and level of quality, both suppliers choose the decentralized channel in equilibrium.

Keywords

Acknowledgement

This work was supported by the Ministry of Education of the Republic of Korea and the National Research Foundation of Korea (NRF-2016S1A5A8017679).

References

  1. Aaker, D. A., & Biel, A. L. (1993). Brand equity and advertising: Advertising's role in building store brands. Lawrence Erlbaum Associates, Hills-dale, NJ.
  2. Ailawadi, K. L., Pauwels, K., & Steenkamp, J. E. M. (2008). Private label use and store loyalty. Journal of Marketing, 72, 19-30.
  3. Banker, R. D., Khosla, I., & Sinha, K. K. (1998). Quality and competition. Management Science, 44(9), 1179-1192.
  4. Binninger, A-S. (2008). Exploring the relationships between retail brands and consumer store loyalty. International Journal of Retail and Distribution Management, 36(2), 94-110.
  5. Bonfrer, A., & Chintagunta, P. K. (2004). Store brands: Who buys them and what happens to retail prices when they are introduced? Review of Industrial Organization, 24, 195-218.
  6. Burritt, C. (2012). Best Buy CEO Hubert Joly considers buying electronics brands. Businessweek.com, November 14.
  7. Collins-Dodd, C., & Lindley, T. (2003). Store brands and retail differentiation: The influence of store image and store brand attitude on store own brand perceptions. Journal of Retailing and Consumer Services, 10, 345-352.
  8. Corstjens, M., & Lal, R. (2000). Building store loyalty through store brands. Journal of Marketing Research, 37(August), 281-291.
  9. Coughlan, A. T. (1985). Competition and cooperation in marketing channel choice: Theory and application. Marketing Science, 4(2), 110-129.
  10. Coughlan, A. T., & Wernerfelt, B. (1988). Credible delegation by oligopolists: A discussion of distribution channel management. Management Science, 35(2), 226-239.
  11. Desai, P. (2001). Quality segmentation in spatial markets: When does cannibalization affect product line design? Marketing Science, 20(3), 265-283.
  12. Gielens, K., Gijsbrechts, E., & Dekimpe, M.G. (2014). Gains and losses of exclusivity in grocery retailing. International Journal of Research in Marketing, 31, 239-252.
  13. Gonzalez-Benito, O., & Martos-Partal, M. (2012). Role of retailer positioning and product category on the relationship between store brand consumption and store loyalty. Journal of Retailing, 88(2), 236-249.
  14. Liu, Y., & Tyagi, R. K. (2009). The Benefits of upward channel decentralization. Management Science, 57(4), 741-751.
  15. McGuire, T. W., & Staelin, R. (1983). An industry equilibrium analysis of downstream vertical integration. Marketing Science, 2(2), 161-191.
  16. Moorthy, K. S. (1984). Market segmentation, self-selection, and product line design. Marketing Science, 3(4), 288-307.
  17. Moorthy, K. S. (1988). Strategic decentralization in channels. Marketing Science, 7(4), 335-355.
  18. Netessine, S., & Taylor, T.A. (2007). Product line design and production technology. Marketing Science, 26(1), 101-117.
  19. Peres, R., & Van den Bulte, C. (2014). When to take or forgo new product exclusivity: Balancing protection from competition against word-of-mouth spillover. Journal of Marketing, 78, 83-100.
  20. Shi, H., Liu, Y., & Petruzzi, N. C. (2013). Consumer heterogeneity, product quality, and distribution channels. Management Science, 59(5), 1162-1176.
  21. Steenkamp, J. E. M., & Dekimpe, M. G. (1997). The increasing power of store brands: Building loyalty and market share. Long Range Planning, 30(6), 917-930.
  22. Trivedi, M. (1998). Distribution channels: An extension of exclusive retailership. Management Science, 44(7), 896-909.
  23. Villas-Boas, J. M. (1998). Product line design for a distribution channel. Marketing Science, 17(2), 156-169.
  24. Raju, J. S., and Z. J. Zhang (2005), "Channel Coordination in the Presence of a Dominant Retailer," Marketing Science, 24(2), 254-262.
  25. Raju, J. S., Srinivasan, V., & Lal, R. (1990). The effects of brand loyalty on competitive price promotional strategies. Management Science, 36(3), 276-304.
  26. Zhao, X., Atkins, D., & Liu, Y. (2009). Effects of distribution channel structure in markets with vertically differentiated products. Quantitative Marketing and Economics, 7, 377-397.