Modeling of Marketing Channels: Implications for Both Fields and a Call for Future Research

Abstract:     
Game-theoretic models of marketing channels typically rely on simplifying assumptions that, from a behavioral perspective, often appear naïve. However, behavioral researchers have produced such an abundance of behavioral regularities that they are impossible to incorporate into game-theoretic models. We believe that a focus on three core findings would benefit both fields; these are: First, beliefs that are held by the various players regarding profit consequences of different actions are incomplete and often biased; second, players’ preferences and optimization objectives are not commonly known; and third, players have insufficient cognitive abilities to achieve optimization objectives. Embracing these three findings shifts the focus from rational decision making to how decision makers learn to improve their decision making skills. Concluding, we believe that greater convergence of game-theoretic modeling and behavioral research in marketing channels would lead to new insights for both fields.

Number of Pages in PDF File: 25

Keywords: marketing channels, game theory, behavioral decision research

JEL Classification: D03, D40, D70, D80, D90, L10, L20, M10, M30, M31

Accepted Paper Series