317 / 2024-04-24 13:12:37

Channel Pricing: A Retail Pass-Through Perspective

distribution channel,operations-marketing interface,cross-brand retail pass-through

The concept of retail pass-through, including own- and cross-brand pass-through, is critical for channel management decisions. However, prior channel research has often neglected cross-brand retail pass-through by assuming symmetric-at-symmetric prices for analytical tractability. In this paper, we first generalize the conventional vertical effect through the lens of retail pass-through in a classical setting of common retailer channels. In particular, we establish the equivalence between the types of vertical strategic interaction and the log-curvature of demand. In addition to the vertical strategic effect, an upstream competition effect can arise from the retailer's various cross-brand pass-through behaviors. Our paper emphasizes the necessity to account for both effects in channel analysis. We apply this framework to well-known strategic questions in channel management leading to results qualitatively different from the literature. Our results have profound implications not only for reassessing the validity of prior research conclusions but also for determining the optimal channel pricing policy.