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Vinay Ramani and Sanjeev Swami
''Demand Expansion and Price Premium Effects of Marketing Effort: Modeling and Comparative Analysis''
( 2017, Vol. 37 No.2 )
In this paper, we compare the outcomes of demand expansion and price premium effects in a dyadic supply chain. We find that in the decentralized setting, the output and effort, as well as the profits of both the manufacturer and the retailer under a demand expansion scenario are lower than that under the price premium scenario. Surprisingly, we find that under both the cases of demand expansion and price premium, the profit of the manufacturer is greater than the profit of the retailer, even though it is only the manufacturer who incurs all the cost.
Keywords: Demand Expansion, Price Premium, Stackelberg Game, First Mover Advantage
JEL: D4 - Market Structure and Pricing: General
L1 - Market Structure, Firm Strategy, and Market Performance: General
Manuscript Received : Feb 21 2017 Manuscript Accepted : Jun 05 2017

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