“Bricks vs. Clicks”: The impact of manufacturer encroachment with a dealer leasing and selling of durable goods

Xiong, Yu, Yan, Wei, Fernandes, Kiran, Xiong, Zhong-Kai and Guo, Nian (2012) “Bricks vs. Clicks”: The impact of manufacturer encroachment with a dealer leasing and selling of durable goods. European Journal of Operational Research, 217 (1). pp. 75-83.

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In durablegoods markets, many brand name manufacturers, including IBM, HP, Epson, and Lenovo, have adopted dual-channel supply chains to market their products. There is scant literature, however, addressing the product durability and its impact on players’ optimal strategies in a dual-channel supply chain. To fill this void, we consider a two-period dual-channel model in which amanufacturer sells adurable product directly through both amanufacturer-owned e-channel and an independent dealer who adopts a mix of selling and leasing to consumers. Our results show that the manufacturer begins encroaching into the market in Period 1, but the dealer starts withdrawing from the retail channel in Period 2. Moreover, as the direct selling cost decreases, the equilibrium quantities and wholesale prices become quite angular and often nonmonotonic. Among other results, we find that both the dealer and the supply chain may benefit from the manufacturer’s encroachment. Our results also indicate that both the market structure and the nature of competition have an important impact on the player’s (dealer’s) optimal choice of leasing and selling.

Item Type: Article
Faculty \ School: Faculty of Social Sciences > Norwich Business School
UEA Research Groups: Faculty of Social Sciences > Research Groups > Innovation, Technology and Operations Management
Depositing User: Elle Green
Date Deposited: 27 Jul 2012 11:26
Last Modified: 07 Nov 2022 17:30
URI: https://ueaeprints.uea.ac.uk/id/eprint/39222
DOI: 10.1016/j.ejor.2011.08.012

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