4 Presentations

• 
  09:00 AM - 09:25 AM

  Price and Advertising Incentives for Manufacturer Stackelberg Channels

  • Sihem Taboubi, presenter, GERAD - HEC Montréal

  The purpose of this study is to investigate if price and advertising decisions in a bilateral monopoly can be coordinated through the use of one-sided incentive strategies.
  I design two incentives that take the form of a wholesale price reduction and a cooperative advertising program and identify the conditions under which the manufacturer, who acts as a Stackelberg leader, is interested by their implementation. I demonstrate that the incentives' implementation depends on the initial brand's goodwill and the manufacturer's profit margin.

• 
  09:25 AM - 09:50 AM

  Vehicle Scrappage Incentives to Accelerate Heterogeneous Consumers' Replacement Decisions

  • Hosain Zaman, presenter, GERAD, HEC Montréal
  • Georges Zaccour, Chair in Game Theory and Management, GERAD and HEC Montréal

  Vehicle scrappage subsidy programs have been widely applied by governments with the
  aim of replacing old cars by newer, more fuel efficient ones. While these programs have
  been implemented to motivate earlier replacements, their effectiveness may not be as much
  as it is expected. From a cost-benefit perspective, consumers who would have replaced
  in the absence of the program need to be addressed when evaluating net benefits of the
  program which necessitates accounting for variations in consumers' willingness to replace
  . Considering consumer heterogeneity in net trade-in valuation, this study investigates a
  dynamic vehicle replacement problem based on life cycle optimization (LCO) approach.
  We theoretically demonstrate that although increasing the subsidy level motivates low
  value consumers to replace earlier, it induces consumers with high net trade-in valuation to
  replace later to become eligible for the subsidy program. Also, we developed a simulation
  program based on real data to show the application of our general model. According to
  the simulation results, ignoring consumer heterogeneity could result in overestimation of
  net benefits of the scrappage program.

• 
  09:50 AM - 10:15 AM

  Fines imposed on caught counterfeiters and pocketed by the genuine firm. A differential game approach.

  • Andrea Di Liddo, presenter, Department of Economics, University of Foggia
  • Marta Biancardi, Department of Economics, University of Foggia (Italy)
  • Giovanni Villani, Department of Economics and Finance, University of Bari (Italy)

  We consider a manufacturer of a luxury item that is forged by a counterfeiter. To combat counterfeiting the public authority imposes a penalty to the infringer and invests resources to catch him. The amount of the penalty is pegged to the price of the legal product and is collected by the the genuine producer.
  The demand of both genuine and fake items is increasing with respect to the brand reputation and is a linear function of the prices of the two products. The legal manufacturer invests money in advertising the brand.
  A differential game is proposed to study the competition between the two firms and Nash equilibria are analytically and numerically investigated.
  Moreover, comparing the payoffs of the brand owner, we prove that, for some ranges of fine and catching efforts, the genuine producer is better off in the presence of counterfeiting than in the absence of it.

  Keywords: Counterfeiting; Fines; Pricing; Advertising; Differential game.

• 
  10:15 AM - 10:40 AM

  Consignment contracts with cooperative programs and price discount mechanisms in a dynamic supply chain

  • Pietro De Giovanni, presenter, ESSEC Business School
  • Rudy Cesaretto,

  This paper investigates whether a supply chain can achieve coordination by implementing two mechanisms: a cooperative advertising program and a price discount mechanism. We start by analyzing a consignment contract with a revenue sharing agreement, in which a manufacturer decides both the price and the quality investment while the retailer sets the store advertising efforts. The manufacturer is the brand owner and increases the goodwill of its business by quality and pricing. We solve three dynamic games, in which the manufacturer is the Stackelberg leader, and compare the related solutions. We discover that the manufacturer, as chain leader, will always propose the adoption of a coordination mechanism. When the manufacturer opts for a cooperative program, the retailer is always economically better-off; thus, a cooperative program is always profit-Pareto-improving. When the manufacturer opts for a price discount mechanism, the retailer is always economically worse-off because the discount applies only to her margins. Nevertheless, the price discount mechanism is profit-Pareto-improving in the case of high production cost: The price discount allows for considerably reducing the retail price, which translates to a substantial demand increase. In all other cases, the retailer sets zero price discount, thus preferring a non-coordinated framework.
  Keywords: Pricing, Advertising, Marketing-Operations interface, Game theory.