Impact of Retailer’s Myopia on Channel’s Strategies

Abstract

We investigate the effects of retailer’s myopic behavior on channel members strategies and on sales in a single-manufacturer single-retailer distribution network (bilateral monopoly). The manufacturer controls her marketing effort and the retailer his price and marketing effort. Demand depends on, among other variables, goodwill whose evolution is function of both players’ marketing efforts. It is shown that a myopic retailer prices at a lower price than a nonmyopic one but invests less in marketing effort. The manufacturer confronted to a myopic retailer sets her marketing effort at a higher level. Manufacturer’s performance is hurt by a myopic retailer.