On the Coordination of Dynamic Marketing Channels and Two-Part Tariffs

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This paper shows that the important result obtained in a static marketing channel, namely, that the manufacturer can coordinate the channel through a two-part wholesale tariff, does not extend to a dynamic setting. The existence of such a coordinated two-part tariff is shown under the restrictive assumptions of (i) a full commitment by the manufacturer to the vertically integrated solution; and (ii) a retailer that cannot influence the evolution of the state (brand equity). However, the conclusion is that it is not in the manufacturer’s best interest to commit.

, 26 pages

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G-2006-20.pdf (200 KB)