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12-27北京外国语大学国际商学院李雪博士: Non-uniform vs. Uniform Pricing for Branded Variants: Implications on Equilibrium Channel Structures




  Existing literature has shown that high degree of product substitutability can drive a duopoly to choose decentralized channel structure (selling products indirectly through an exclusive retailer) in equilibrium. This theory is built on the assumption that each competing manufacturer sells a single product. We examine to what extent this theory still holds when each manufacturer sells two variants of a product category where the market sizes of the two variants may not be equal. We consider two commonly used pricing schemes for branded variants. The first is uniform pricing under which branded variants have the same price. The second is non-uniform pricing under which different variants have different prices. We show that the above theory preserves under uniform pricing. Under non-uniform pricing, however, decentralization can arise as an equilibrium even when one of the branded variants has a low degree of product substitutability as long as the market size of the other variant is relatively large. Thus, a purely decentralized system is more likely to happen with non-uniform pricing than with uniform pricing. We further study the situation with a nonexclusive retailer case. We find that in this case decentralization may arise as an equilibrium when the products are not highly substitutable, as long as the spillover effect is not small.