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Academic Lecture: Bargaining and Sharing Revenue with a Big Retailer in Channel Selection
2015-4-7
Time: 1:00-2:40pm, April 10th, 2015
Location: Room 335, School of Economic  & Management
Speaker: Prof. Dai Yue, Fudan University, Shanghai 

Abstract: Motivated by the electronic appliances market in China, we study a manufacturer?s channel selection problem with two asymmetric retailers. The big retailer operates a store-within-a-store model, where the manufacturer sets up his own store, pays the slotting fee and a portion of the revenue to the retailer. The small retailer is a traditional reseller, which might be independent or integrated by the manufacturer. We formulate a three-stage game for the manufacturer?s channel selection problem and analyze three mechanisms determining the transaction terms: (1) the revenue-sharing rate and the slotting fee are both negotiable, (2) the revenue-sharing rate alone is negotiable while the slotting fee is exogenously given, (3) the revenue-sharing rate is decided by the big retailer and the slotting fee is exogenous. Our findings include: the bargaining mechanisms (1) and (2) result in the two payment themes as observed in the practice; between the manufacturer and the big retailer, the latter prefers bargaining over both the revenue-sharing rate and the slotting fee while the former favors bargaining over the revenue-sharing rate solely; when the revenue-sharing rate alone is negotiable, the big retailer will achieve a higher revenue share if the slotting fee is lower; when the transaction term is single handedly determined by the big retailer rather than being negotiated, the big retailer might squeeze out the profit of the manufacturer and result in a lose-lose situation in the channel.

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