Paper
Optimal Channel Marketing Efforts under Stochastic Demand: Influence of Channel Costs and Sharing Structure
- Authors:
- Jiali Ding; Xiangdong Liu
- Abstract
- In a model setting of Stackelberg game between manufacturer and retailer under multiplicative stochastic market demand shock of uniform distribution, this paper solves the channel optimization for the two parties by not only considering the cost and sharing structure in the supply chain such as channel costs, efficiency, revenue sharing and sales allocation, but also incorporating the channel marketing efforts into the demand function as an endogenous factor. We offer the optimal marketing efforts solution and channel choice for manufacturer and retailer, and we show how the optimal choices and the equilibrium profits will be influenced by the channels’ cost and sharing structure between the two parties. We find that while both parties will benefit from single channel under medium levels of revenue share ratio, both parties will benefit from dual-channel as long as the operation cost of the direct channel is lower than certain threshold which is actually independent of the demand fluctuation.
- Keywords
- Marketing Efforts; Channel Optimization; Stochastic Demand; Supply Chain Management; Operation Research
- StartPage
- 20
- EndPage
- 22
- Doi