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Distribution Channel Strategies In A Mixed Market, Junsong Bian, Xiaolei Guo, Kevin Li

Odette School of Business Publications

This paper studies equilibrium channel strategies in a mixed market with a public firm and a private firm. The public firm is concerned with social welfare, while the private firm aims to maximize its own profit. Each firm decides whether to adopt an integrated or a decentralized channel. We examine two standard market competition modes, Bertrand and Cournot. Within each competition mode, we consider two typical vertical contracts, wholesale-price and two-part tariff contracts. Our results suggest that equilibrium channel structures depend on the market competition mode, the vertical contract form, and the level of product substitutability. Specifically, the channel strategy …