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The Effects of Consumer Rebates in a Competitive Distribution Channel

  • Salma KarrayEmail author
Chapter
Part of the International Series in Operations Research & Management Science book series (ISOR, volume 280)

Abstract

This research investigates the effectiveness of consumer rebates offered by competing manufacturers in a distribution channel. We consider a two-manufacturer, two-retailer channel and develop a two-period model where consumers’ preferences are distributed along a Hotelling line. The rebate consists in a price discount that can be redeemed on the second period. We solve three Stackelberg games: a benchmark where no rebate is offered, a symmetric game where both manufacturers offer rebates, and an asymmetric game where only one manufacturer provides a rebate. Comparisons of equilibrium solutions show that while manufacturers should not offer rebates, they could do so due to a prisoner dilemma situation when their wholesale prices are high.

Keywords

Rebates Distribution channels Competition Pricing Game theory 

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Copyright information

© Springer Nature Switzerland AG 2020

Authors and Affiliations

  1. 1.Faculty of Business and ITUniversity of Ontario Institute of TechnologyOshawaCanada

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