Charles A. Ingene

Coordination and manufacturer profit maximization: The multiple retailer channel

Abstract This paper explores wholesale pricing behavior within a two-level vertical channel consisting of a manufacturer selling through multiple independent retailers. The introduction of multiple retailers is important for several reasons. These include: (1) the determination of optimal channel breadth; (2) an analysis of the optimality of channel coordination for all channel members; and (3) the determination of the distribution of each dyads profits between manufacturer and retailer. The authors demonstrate the existence of a two-part tariff wholesale pricing policy, common to all retailers, that fully coordinates the channel. They then show that the manufacturer can generally obtain greater profits by setting a unique two-part tariff pricing-policy that does not coordinate the channel. Finally, the authors show that the fixed-fee component of either two-part tariff determines channel breadth, that is, the number of profit-maximizing independent retailers that are willing to participate in the channel.

Manufacturer-Optimal Wholesale Pricing When Retailers Compete

The existing marketing science literature on channels of distribution has emphasized pricing strategies that maximize either channel or manufacturer margin. This emphasis has implicitly assumed that optimal wholesale prices are independent of any fixed fees charged by the manufacturer. While this assumption is justified in a single-manufacturer, single-retailer world, it generally does not lead to manufacturer profit maximization in a world of competing retailers. In this paper we derive a manufacturer-optimal wholesale pricing strategy by simultaneously determining both elements of a two-part tariff (consisting of a wholesale price and a fixed fee). We show that the manufacturer will always prefer this “sophisticated” pricing strategy to one that maximizes either channel or manufacturer margin. We also show that both elements of the optimal tariff are functions of the absolute difference between retailer fixed costs.

Determinants of retail sales in SMSAs

Abstract This paper develops a theoretical model to explain consumer behavior in the context of spatially extensive retail markets. Several socio-economic variables influencing total and per capita retail sales are identified and their effects on sales are predicted. The theoretical framework presented in this paper serves to link location theoretic arguments to the retail trade arena and to provide a guideline for the empirical work reported. The empirical work encompasses nine retail trade sectors plus retailing in the aggregate. Good results are obtained for total sales and credible results for per capita sales using data from 229 United States SMSAs.

The backward incidence of pollution control in a rigid-wage economy

Abstract The backward incidence of pollution controls onto the polluting and nonpolluting industries is examined in a two-sector, rigid-wage economy characterized by unemployment in both the short run and the long run. As expected, more restrictive pollution controls result in contraction in the polluting sector and expansion in the nonpolluting sector. Somewhat unexpectedly, national income may rise with stronger pollution controls, if the polluting industry is relatively capital intensive.

Scale Economies in American Retailing: A Cross-Industry Comparison

Determination of the nature and scope of competition in the channel of distribution is of increasing interest to macromarketers because of the growing importance of marketing in the American economy. This competition is influenced by many factors, among which is the extent of scale economies. This article investigates economies of scale in retailing from both a conceptual and an empirical perspective. This represents the first stage in an analysis of competition in retailing and, ultimately, throughout the channel of distribution.

The profit equivalence of mill and uniform pricing policies

Abstract In this note we point out a simple fact that seems to have been overlooked in the voluminous literature on mill pricing and uniform delivered pricing in location theory — the profit maximization problems involved are mathematically equivalent when the demand functions are linear.

The State of the Art in Modeling Migration in LDCS: A Comment

Early research on migration in LDCs, initially motivated by labor market postulates offered by Harris and Todaro, built upon general equilibrium models of interregional trade. In contrast, recent research on migration (such as Brueckner and Kim in this issue) builds upon a partial equilibrium analysis that is based on an urban land model. There are subtle differences between these models that complicate intermodel comparisons. The current paper, motivated by this complexity, has three purposes: (1) a mathematical explication of the state of the art in migration modeling, (2) a provision of further insights into the Todaro paradox, and (3) a suggestion for future research predicated on melding the urban land and interregional literatures.

Resource allocation in a general equilibrium model of production under uncertainty: The case of variable supply of labor☆

Abstract This paper examines the effects of a marginal change in uncertainty on resource allocation and factor rewards by relaxing the assumption of factor inelasticity. We demonstrate that integrating a variable labor supply into Batras two-sector uncertainty model can mitigate or reverse many of the earlier results. Specifically, a marginal increase in uncertainty may trigger the resource to move from the certainty sector to the uncertainty sector in the presence of a backward-bending labor supply curve.

Consumer Expenditures and Consumer Satisfaction with the Spatial Marketing System

This article establishes a theoretical relationship between consumer satisfaction with the spatial marketing system and consumer expenditures on the product and service offerings of that system. Spatial marketing is defined as including those sectors where customers must travel to and from an outlet to acquire the offering; thus, it encompasses most of retailing and many of the consumer service industries. An empirical test is performed with 1977 data on grocery stores in 168 American SMSAs.

Retail evolution: Historical facts, theoretical logic and critical thinking

Purpose – The purpose of this paper is to enhance students’ ability to use theory to assess facts logically and creatively. To achieve this end, the author explicates the evolution of retailing from its pre-industrial genesis to its Internet descendants in a historically based retail strategy class that investigates the determinants of new retail formats (major retail innovations – MRIs) over a > 200 year span. MRIs entail a major reconfiguration of the retail mix (i.e. price, product, place, promotion and personnel) , take significant business from existing formats that sell the same goods, generate greater benefits to customers than do rival formats and are widely imitated. Design/methodology/approach – The author chronologically presents how the industrial revolution generated major environmental changes that facilitated a creative and highly effective re-organization of the retail mix. Findings – Changes in environmental factors (e.g. mass production, transportation, location of population and communication) made possible retail formats that could not have existed earlier. Research limitations/implications – The course is based on two theories that are linked by the retail mix; one theory relates to consumer store choice, while the other relates to the minimum market size required for a retail format to be viable. To illustrate, more personnel raises service, drawing customers from rivals while raising costs; higher costs raise the needed market size. Originality/value – All six MRIs are derived from the two aforementioned theories. Experience indicates these theories are valid for assessing retailing at all stages of economic development. The course is based on the authors own material.