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Competing Manufacturers In A Retail Supply Chain: On Contractual Form And Coordination

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Executive Summary

It is common for a retailer to sell products from competing manufacturers. How then should the firms manage their contract negotiations? The supply chain coordination literature focuses either on a single manufacturer selling to a single retailer or one manufacturer selling too many (Possibly competing) retailers. The authors find that some key conclusions from those market structures do not apply in the setting, where multiple manufacturers sell through a single retailer. They allow the manufacturers to compete for the retailer's business using one of three types of contracts: a wholesale-price contract, a quantity-discount contract, or a two-part tariff. It is well known that the latter two, more sophisticated contracts enable the manufacturer to coordinate the supply chain, thereby maximizing the profits available to the firms.

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