Group for Research in Decision Analysis


The Impact of Manufacturers' Wholesale Prices on Retailer's Shelf-Space and Pricing Strategies

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The paper examines shelf-space allocation and pricing decisions in the marketing channel as the results of a static game played à la Stackelberg between two manufactur- ers of competing brands and one retailer. The competing manufacturers act as leaders that play a simultaneous and non-cooperative game. They fix their transfer prices by taking into account the shelf-space allocation and price mark-up decisions of their common exclusive dealer. The results indicate that the wholesale prices of brands are strongly linked to their share of the shelf. The main results of our numerical simula- tions may be summarized as follows: firstly, the lower the unit cost and/or the greater the price elasticity, the greater the shelf-space allocated to that brand. Secondly, the higher the shelf space elasticity, the lower are the wholesale prices and the profits of all channel members.

, 23 pages