We characterize equilibrium pricing strategies in a marketing channel in two scenarios. In the first scenario, the manufacturer chooses the wholesale prices and the retailer the retail prices of the two versions of a product, i.e., tangible and digital. In the second scenario, the players use a revenue-sharing contract for only the digital version, while the competing version is managed by a wholesale price contract. The problem is inspired from a pricing controversy in the ebook industry.
Published May 2014 , 10 pages