An Analysis of Vertical Control in Three-tier Demand Chains: Resale Price Maintenance in Inter-Brand Competition
Date Issued
2007
Date
2007
Author(s)
Shih, Ying Ju
DOI
zh-TW
Abstract
In an era where customers stress multiple choices, the majority of products come in both name brands and generic brands. Name brand products are usually positioned with a high-quality high-price value, whereas generic brands are set with lower prices because of its lower quality. The Sales channel structure is usually composed of manufacturer–retailer two tier demand chain, or the manufacturer–distributor–retailer three-tier demand chain. To avoid interbrand competition, the name brands usually use the resale price maintenance strategy. However, in three-tier demand chains, distributors may have arbitrage space under the set price difference standard, a conflict that may arise in the RPM policy.
This paper discusses the phenomenon of dealer pricing decisions within name brand organization. RPM usually sets minimum prices which is an effective strategy in the two-tier demand chain. A three-tier demand chain mathematical model is constructed for name brand inter-channel competition. Through profit optimization it has been proven that minimum RPM is not effective. On the contrary, fixed price restraints or maximum RPM should be used.
Subjects
轉售價格限制
垂直控制
品牌間競爭
品質與價格需求模型
Resale Price Maintenance
Vertical Control
Inter-Brand Competition
Demand Model of Quality and Price
Type
thesis
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