Title: Price and quality-based competition and channel structure with consumer loyalty
Abstract: Inspired by practices of the Chinese household appliance industry, we explore interaction of channel structure with price-and quality-based competition between two manufacturers who are asymmetric on customer loyalty. Each manufacturer sells its product through either a decentralized channel or an integrated channel to customers and faces demand depending on quality, retail price, and customer loyalty. We divide the market into two types: The price-sensitive market and quality-sensitive market, and find that the equilibrium depends on the market type. Different from the literature, in a quality-sensitive market with higher market innovation desire, the pure integration structure is likely to be in equilibrium, and furthermore, the manufacturer with higher loyalty can earn higher profit; Otherwise, the pure decentralization structure is in equilibrium. So, a manufacturer benefits the most from consumers’ higher quality valuation, strong loyalty, and channel centralization.
Publication Year: 2017
Publication Date: 2017-10-01
Language: en
Type: article
Indexed In: ['crossref']
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Cited By Count: 94
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