- Jack, Joseph & Morton Mandel School of Applied Social Sciences (x)
- 2001 (x)
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Show moreThis dissertation deals with issues that arise in distribution channel management where channel partners face uncertain environments. The two essays address two related but slightly different ways channel partners often interact in environments characterized by uncertain demand. In the first essay, I look at voluntary information sharing arrangements between distribution channel partners, like those in the Category Management initiative in food retailing, in two different settings. The results from a simple bilateral monopoly channel indicate an asymmetry in retailer's and manufacturer's incentives to enter such information-sharing alliances. Only relatively sophisticated retailers find it profitable to enter such alliances, while manufacturers benefit from such arrangements under a broader set of conditions. In a setting with multiple manufacturers selling through a common retailer, I provide an explanation for the category captain phenomenon, wherein the retailer enters into an exclusive alliance with only one supplier. Thus an asymmetric outcome obtains even if the manufacturers are ex-ante asymmetric. The second essay looks at logistics improvements that channels have undertaken, with or without the pooling of demand information. The practice of Quick Delivery is being adopted in some distribution channels as improved ability to forecast demand and better logistic practices enable a channel to minimize retail inventory and bring efficiency. However, in the presence of demand uncertainty, retail inventory also enables the manufacturer to better manage the competition among retailers carrying his product. Thus, in channels practicing Conventional Delivery , having excess retail inventory allows manufacturers to extract surplus from the retailers more effectively, using the possibility of return of unsold goods. I analyze the balance of the above two forces in models of a distribution channel with retail competition. It is shown that when retail competition is not very intense and when price elasticity is relatively high, it may be beneficial for a manufacturer to continue with conventional delivery practices in the channel. In such cases, the strategic benefit of better extraction of surplus from retailers and ability to induce lower stock-out situations may outweigh his share of the efficiency gain brought about by a reduced inventory level for the channel.
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