Online Manufacturer Referral to Heterogeneous Retailers. Issue 11 (7th April 2015)

• Record Type: Journal Article
• Authors: Wu, Hao; Cai, Gangshu (George); Chen, Jian; Sheu, Chwen
• Is Part Of: Production and operations management. Volume 24:Issue 11(2015:Nov.)
• Page Start: 1768
• Page End: 1782
• Publication Date: 2015-04-07
• Subjects: manufacturer referral -- heterogeneous retailers -- channel competition -- game theory; Production management -- Periodicals; 658.505
• DOI: 10.1111/poms.12363
• Languages: English
• ISSNs: 1059-1478

Abstract

Abstract : Since the development of the Internet, thousands of manufacturers have been referring consumers visiting their websites to some or all of their retailers. Through a model with one manufacturer and two heterogeneous retailers, we investigate whether it is an equilibrium for the manufacturer to refer consumers exclusively to a retailer or nonexclusively to both retailers. Our analysis indicates that nonexclusive referral is the manufacturer's equilibrium choice if the referral segment market size is sufficiently large; otherwise, exclusive referral is the equilibrium choice. In exclusive referral, the manufacturer would refer consumers to the more cost‐efficient and smaller retailer. In the presence of infomediary referral, it is less likely for both exclusive and nonexclusive referrals to be an equilibrium, as the infomediary referral segment grows. We also show our qualitative results are robust even if there were price discrimination among consumers, referral position disparity, local consumers, and asymmetric referral market sizes.