Horizontally Differentiated Store Brands: Production Outsourcing to National Brand Manufacturers
We study a retailer's strategic decision with regard to outsourcing the production of such types of store brands (SBs) to national brand (NB) manufacturers. The wholesale price of NB is assumed to be set by the manufacturer, while that of the SB is assumed to be set by the retailer. When a reta...
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| Format: | Article |
| Language: | English |
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Wiley
2014-01-01
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| Series: | Journal of Applied Mathematics |
| Online Access: | http://dx.doi.org/10.1155/2014/949470 |
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| author | Shun Shindo Nobuo Matsubayashi |
| author_facet | Shun Shindo Nobuo Matsubayashi |
| author_sort | Shun Shindo |
| collection | DOAJ |
| description | We study a retailer's strategic decision with regard to outsourcing the production of such types of store brands (SBs) to national brand (NB) manufacturers. The wholesale price of NB is assumed to be set by the manufacturer, while that of the SB is assumed to be set by the retailer. When a retailer outsources SB production to an NB manufacturer, the NB manufacturer might suffer from cannibalization due to offering both the SB and the NB, implying that a strategic interaction between the retailer and manufacturer is an important issue. Based on this motivation, we mainly focus on the strategy of a dominant retailer in such a situation and investigate it with a game-theoretic approach. We show that the optimal strategy for the SB retailer sensitively depends on the degree of differentiation between the SB and the NB. In particular, if both products are less differentiated, the retailer benefits from offering only the SB, and, in this case, the retailer should offer its wholesale price, after the manufacturer sets the NB wholesale price. Furthermore, it is shown that the optimal strategies of the retailer are socially efficient, if and only if the SB and the NB are sufficiently differentiated. |
| format | Article |
| id | doaj-art-80ada585b0f84bbe97647afaf26e49ab |
| institution | Kabale University |
| issn | 1110-757X 1687-0042 |
| language | English |
| publishDate | 2014-01-01 |
| publisher | Wiley |
| record_format | Article |
| series | Journal of Applied Mathematics |
| spelling | doaj-art-80ada585b0f84bbe97647afaf26e49ab2025-02-03T01:08:06ZengWileyJournal of Applied Mathematics1110-757X1687-00422014-01-01201410.1155/2014/949470949470Horizontally Differentiated Store Brands: Production Outsourcing to National Brand ManufacturersShun Shindo0Nobuo Matsubayashi1Department of Administration Engineering, Faculty of Science and Technology, Keio University, 3-14-1 Hiyoshi, Kohoku-ku, Yokohama 223-8522, JapanDepartment of Administration Engineering, Faculty of Science and Technology, Keio University, 3-14-1 Hiyoshi, Kohoku-ku, Yokohama 223-8522, JapanWe study a retailer's strategic decision with regard to outsourcing the production of such types of store brands (SBs) to national brand (NB) manufacturers. The wholesale price of NB is assumed to be set by the manufacturer, while that of the SB is assumed to be set by the retailer. When a retailer outsources SB production to an NB manufacturer, the NB manufacturer might suffer from cannibalization due to offering both the SB and the NB, implying that a strategic interaction between the retailer and manufacturer is an important issue. Based on this motivation, we mainly focus on the strategy of a dominant retailer in such a situation and investigate it with a game-theoretic approach. We show that the optimal strategy for the SB retailer sensitively depends on the degree of differentiation between the SB and the NB. In particular, if both products are less differentiated, the retailer benefits from offering only the SB, and, in this case, the retailer should offer its wholesale price, after the manufacturer sets the NB wholesale price. Furthermore, it is shown that the optimal strategies of the retailer are socially efficient, if and only if the SB and the NB are sufficiently differentiated.http://dx.doi.org/10.1155/2014/949470 |
| spellingShingle | Shun Shindo Nobuo Matsubayashi Horizontally Differentiated Store Brands: Production Outsourcing to National Brand Manufacturers Journal of Applied Mathematics |
| title | Horizontally Differentiated Store Brands: Production Outsourcing to National Brand Manufacturers |
| title_full | Horizontally Differentiated Store Brands: Production Outsourcing to National Brand Manufacturers |
| title_fullStr | Horizontally Differentiated Store Brands: Production Outsourcing to National Brand Manufacturers |
| title_full_unstemmed | Horizontally Differentiated Store Brands: Production Outsourcing to National Brand Manufacturers |
| title_short | Horizontally Differentiated Store Brands: Production Outsourcing to National Brand Manufacturers |
| title_sort | horizontally differentiated store brands production outsourcing to national brand manufacturers |
| url | http://dx.doi.org/10.1155/2014/949470 |
| work_keys_str_mv | AT shunshindo horizontallydifferentiatedstorebrandsproductionoutsourcingtonationalbrandmanufacturers AT nobuomatsubayashi horizontallydifferentiatedstorebrandsproductionoutsourcingtonationalbrandmanufacturers |