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Three essays on retailer brand introduction, quality information disclosure and distribution channel

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Title: Three essays on retailer brand introduction, quality information disclosure and distribution channel
Author(s): Xiao, Ying
Director of Research: Liu, Yunchuan
Doctoral Committee Chair(s): Liu, Yunchuan
Doctoral Committee Member(s): Balachander, Subramanian; Chhajed, Dilip; Qualls, William J.; Petruzzi, Nicholas
Department / Program: Business Administration
Discipline: Business Administration
Degree Granting Institution: University of Illinois at Urbana-Champaign
Degree: Ph.D.
Genre: Dissertation
Subject(s): Distribution channel Quality disclosure Retailer brand Game theory
Abstract: This dissertation consists of three essays studying the impact of retailer store brand introduction to the upstream manufacturer, channel quality disclosure and the overall distribution channel efficiency. Chapter 2 studies the retailer brand introduction strategy with consumer evaluation cost. In the market place, there is a growing trend for retailers to introduce premium store brands to complement manufacturer brands. In this chapter, I study the effects of a retailer premium brand on the profitability of a manufacturer and a retailer when consumers do not have full information about the brands and have to incur a cost to evaluate the products. I show that a manufacturer can benefit when the retailer introduces a retailer brand, and the benefit may increase with the rising popularity of the retailer brand. This happens when the introduction of a retailer brand motivates the retailer to induce consumer evaluation and the manufacturer can take advantage of that to charge a high wholesale price for the manufacturer brand. Depending on the level of consumer evaluation cost, a retailer brand is more likely to be introduced in either a decentralized or a centralized channel. Furthermore, consumer welfare can be higher in a decentralized channel than in a centralized channel. Chapter 3 studies the benefits of a decentralized channel with voluntary quality disclosure. Traditional distribution channel literature suggests that a centralized channel structure is more efficient than a decentralized channel structure. In this chapter, I find that a decentralized channel can some- times outperform a centralized channel structure, and the aggregated chan- nel profit in a decentralized channel can be higher disregarding the negative impact from channel double marginalization. This occurs when the product quality information is private and the manufacturer incurs a substantial cost to disclose product quality information. I also show that the distribution of product quality plays a role in shaping consumer beliefs about product quality, leading to a more efficient decentralized channel performance. Chapter 4 combines chapter 2 and chapter 3 to study the quality disclosure strategy with a store brand introduction. In chapter 3, I study a manufac- turer’s strategy to disclose product quality with a passive retailer. In this essay, I extend the model to investigate the strategic quality disclosure from both a manufacturer and a retailer when the retailer introduces a retailer brand. I find that a manufacturer has reduced incentive to conduct quality disclosure with a store brand introduction. This incentive is also affected by asymmetric disclosure costs as well as the average retailer brand quality. Unlike in the competition case, the retailer chooses a disclosure strategy to leverage the sales for both manufacturer brand and the retailer, leading to a higher incentive to disclose when the disclosure costs are the same. The profit and channel efficiency implications are also discussed.
Issue Date: 2012-09-18
Rights Information: Copyright 2012 Ying Xiao
Date Available in IDEALS: 2012-09-18
Date Deposited: 2012-08

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