Exclusive Channels and Revenue Sharing in a Complementary Goods Market

Marketing Science, Vol. 31, No. 1, pp. 172-187, 2012

48 Pages Posted: 29 Sep 2011 Last revised: 28 Feb 2012

See all articles by Gangshu (George) Cai

Gangshu (George) Cai

Santa Clara University

Yue Dai

Fudan University - Department of Management Science

Sean Zhou

The Chinese University of Hong Kong (CUHK)

Date Written: September 27, 2011

Abstract

This paper evaluates the joint impact of exclusive channels and revenue sharing on suppliers and retailers in a hybrid duopoly common retailer and exclusive channel model. The model bridges the gap in the literature on hybrid multichannel supply chains with bilateral complementary products and services with/without revenue sharing. The analysis indicates that, without revenue sharing, the suppliers are reluctant to form exclusive deals with the retailers, thus, no equilibrium results. With revenue sharing from the retailers to the suppliers, it can be an equilibrium strategy for the suppliers and retailers to form exclusive deals. Bargaining solutions are provided to determine the revenue sharing rates. Our additional results suggest forming exclusive deals becomes less desirable for the suppliers if revenue sharing is also in place under nonexclusivity. In our extended discussion, we also study the impact of channel asymmetry, an alternative model with fencing, composite package competition, and enhanced price-dependent revenue sharing.

Suggested Citation

Cai, Gangshu (George) and Dai, Yue and Zhou, Sean, Exclusive Channels and Revenue Sharing in a Complementary Goods Market (September 27, 2011). Marketing Science, Vol. 31, No. 1, pp. 172-187, 2012, Available at SSRN: https://ssrn.com/abstract=1934589

Gangshu (George) Cai (Contact Author)

Santa Clara University ( email )

500 El Camino Real
Santa Clara, CA CA 95053
United States
4085542785 (Phone)

Yue Dai

Fudan University - Department of Management Science ( email )

670 Guoshun Road
Shanghai
China

Sean Zhou

The Chinese University of Hong Kong (CUHK) ( email )

Shatin, N.T.
Hong Kong
Hong Kong

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