SC&L SEMINAR SERIES :: The Effects of Customer Rebates and Retailer Incentives on the Manufacturer Profitability and Sales

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Manufacturers using non-direct distribution channels to sell their products can control sales by using customer rebates and/or incentives given directly to the retailers. Customer rebate is a per unit payment from a manufacturer to the end customer, and retailer incentive is a lump sum payment from a manufacturer to a retailer. We focus on industries, such as automotives, where retailers may price discriminate. We examine the impact of retailer incentives and customer rebates on the manufacturer's pricing and the retailer's ordering decisions under different demand and information scenarios and study which incentive mechanism would benefit the manufacturer under which market conditions. We consider several models to investigate the impact of uncertainty in market conditions, information asymmetry between the manufacturer and the retailer and the behaviors of the individual agents on the manufacturer's pricing and the retailer's procurement decisions. For each model, we analyze different cases where manufacturer's promotional schemes vary from no promotion to simultaneous use of customer rebate and retailer incentive. For each case, we find the subgame perfect Nash equilibrium solutions and we provide additional insights through numerical analysis. Students and faculty are invited to remain after the seminar for a coffee and snacks reception sponsored by The Logistics Institute.


  • Workflow Status: Published
  • Created By: Barbara Christopher
  • Created: 10/08/2010
  • Modified By: Fletcher Moore
  • Modified: 10/07/2016


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