Grant: Discovery Grants Program - Individual

This research program aims at developing game theoretic models for oligopolies where competitive interactions exist between firms operating in a channel. This research program will help identify optimal firms' decisions in different rivalry situations and understand how these decisions are affected by various market and industry conditions. In particular, the results of this research will provide manufacturers and retailers with a better understanding of how their advertising and promotional decisions do affect their payoffs and those of their competitors. Our methodology will be analytical and will consist in developing static and dynamic game theoretic models that represent different scenarios of competition where the effects on payoffs of non-price decision variables are modeled. Game theory allows us to study decisions of distribution channels' members using a system approach. It provides equilibrium solutions for the decisions of several institutions (e.g., retailers and manufacturers) that have interdependent interests but at the same time do maximize their payoffs opportunistically. For most studied situations, non-cooperative games will be considered and Nash and Stackelberg equilibria will be computed. For dynamic games, preference will be for closed-loop and feedback information structures that provide subgame perfect solutions. Our methodology will also involve sensitivity analysis of the obtained equilibria to see how the different model's parameters affect optimal decision strategies. When appropriate, payoffs and equilibria from different scenarios will also be compared to study the effects created by competition. Finally, numerical simulations of the models' parameters will also be conducted to illustrate the sensitivity analysis, the path or the trajectory of the obtained equilibrium strategies. This research program will provide useful answers to institutions operating in distribution channels on how to manage their optimal pricing and non-pricing strategies when facing competition from other institutions that are at the same time suppliers or customers. It will also be helpful to governmental agencies to assess the effects of competition on the market dynamics and consumers' demand and prices.