Faculty Publications
https://hdl.handle.net/10155/403
Faculty Publications (FBIT)2024-03-28T14:02:40ZCooperative advertising in competing supply chains and the long-term effects of retail advertising
https://hdl.handle.net/10155/1333
Cooperative advertising in competing supply chains and the long-term effects of retail advertising
Karray, Salma; Martin-Herran, Guiomar; Sigue, Simon Pierre
The profitability of cooperative advertising (CA) programs is analyzed in a supply chain where competing manufacturers sell their products through competing retailers. We study a two-period game-theoretic model that accounts for positive and negative long-term effects of retail advertising on consumer preferences. We obtain closed-form equilibria in two particular cases where either stores or products are perfectly differentiated. For the general case where both products and stores can be substitutable, we develop a numerical algorithm to find the equilibrium. We compare the equilibria obtained in games where CA is offered and where it is not. The results show that the long-term effects of retail advertising and the levels of substitutability between products and retailers all play a key role in assessing the profitability of CA programs. CA only benefits manufacturers when store and product competition are both low, or retailers are highly differentiated. However, in most cases, retailers do not find such programs profitable except when product substitutability levels are high while store competition is low. Finally, CA can only be win-win arrangements for manufacturers and retailers when the level of store differentiation is very high, the products are moderately substitutable, and retail advertising has a substantial positive long-term impact.
2021-09-03T00:00:00ZInformational and/or Transactional Websites: Strategic Choices in a Distribution Channel
https://hdl.handle.net/10155/843
Informational and/or Transactional Websites: Strategic Choices in a Distribution Channel
Karray, Salma; Sigue, Simon Pierre
While most businesses have faced the decision of whether to operate an informational and/or a transactional website, the literature on website selection in marketing channels remains very sparse. This paper proposes an analytical framework that compares scenarios where a manufacturer uses either an informational, a transactional, or both transactional and informational website in a distribution channel formed by one manufacturer and one retailer. We find that the selection of the optimal website depends on the online market base of the product, the effectiveness of the manufacturer-controlled online communications, and the cross-price effect between online and offline channels. For both the manufacturer and retailer, informational websites are preferable when the online market base is small. With larger online markets, the manufacturer may prefer either informational and transactional websites or exclusively informational websites, while the retailer is always better off with an exclusively informational website. Theoretical and managerial implications of these findings are discussed.
2017-01-01T00:00:00ZModeling reward expiry for loyalty programs in a competitive market
https://hdl.handle.net/10155/794
Modeling reward expiry for loyalty programs in a competitive market
Bazargan, Amirhossein; Karray, Salma; Zolfaghari, Saeed
This paper investigates reward expiry for loyalty programs. It provides insights into the profitability of setting reward expiry for competing firms and identifies conditions under which such a policy would be beneficial. We develop and solve a game-theoretic model that reflects consumer behavior in choosing products and redeeming rewards. Applying a new iterative algorithm, we get the Nash equilibrium outputs for three scenarios (games): (1) neither firm sets an expiry date, (2) both firms set an expiry date, and (3) only one firm sets an expiry date. Comparison of the firms' profits across scenarios shows that the firms' prices and profits are affected by the loyalty program of the competing firm and by consumers' valuation of rewards and of time to rewards. In particular, a firm offering rewards that do not expire should increase its price if the competing firm changes its reward policy from no expiry to expiry, even when the expiry period is quite long. Finally, when customers highly value rewards and time, reward expiry is a dominant strategy for both firms. This means that firms would benefit from setting expiry on their loyalty rewards only if their customers highly value both rewards and time. Alternatively, both firms' rewards should not expire if consumers have low valuations of both rewards and time.
Citation: Bazargan, A., S. Karray and S. Zolfaghari (2017). Modeling reward expiry for loyalty programs in a competitive market. International Journal of Production Economics. DOI: 10.1016/j.ijpe.2017.08.001.
2017-08-10T00:00:00Z‘Buy n times, get one free’ loyalty cards: Are they profitable for competing firms? A game theoretic analysis
https://hdl.handle.net/10155/793
‘Buy n times, get one free’ loyalty cards: Are they profitable for competing firms? A game theoretic analysis
Bazargan, Amirhossein; Karray, Salma; Zolfaghari, Saeed
This paper evaluates whether firms offering loyalty programs (LPs) should choose a restricted redemption policy by imposing a specific number of purchases before customers can redeem their points. Such restriction is commonly offered in form of ‘buy n times, get one free’ loyalty cards. We develop a multinomial logit model where consumer's utility depends on the value of the product and of the rewards. Using an iterative algorithm, we numerically solve a Nash game for two firms offering loyalty programs. Optimal strategies and profits are obtained for three different scenarios (games): (1) both firms do not restrict redemption; (2) both firms restrict redemption; and (3) only one firm restricts redemption while the other firm does not. Our main findings indicate that each firm's optimal strategies are significantly affected by whether the competitor decides to restrict or not to restrict redemption. In particular, a firm that restricts reward redemption should offer a higher price if its competitor also restricts redemption. Further, the dominant strategy of the game depends on customers’ valuations of time and rewards. For example, when customers highly value time but do not highly value rewards, the dominant strategy for both firms is not to restrict redemption. Alternatively, firms can face a Prisoner dilemma situation leading to unrestricted redemption policy for intermediate levels of customer valuation of both time and rewards.
2017-08-10T00:00:00Z