Channel coordination over time: incentive equilibria and credibility

The paper studies a channel of distribution, consisting of a manufacturer and a retailer. In a dynamic game of pricing and advertising, the carry-over effects of channel member's advertising efforts are summarized in a stock of "advertising goodwill". Each channel member has perfect information about the other channel member's price and advertising effort. If each firm employs marketing strategies that are linear functions of the other member's actions, and these strategies are jointly carried out, a Pareto-optimal joint profit maximization outcome can be realized. The paper also addresses the question of credibility of the incentive strategies. (C) 2002 Elsevier Science B.V. All rights reserved.