Myopia in Marketing Channel: A Differential Game Analysis

The paper investigates the impact of retailer's myopic behavior on the strategies and outcomes of channel members. Myopia means that the retailer disregards the evolution of the state of the system when optimizing her payoff. The channel is formed of a single manufacturer selling her product through an exclusive retailer. The manufacturer controls the wholesale price and the advertising rate in the brand equity and the retailer the local promotional effort and the retail price. Feedback Nash equilibria are sought for the two scenarios, i.e., with a myopic retailer and a far-sighted one. Since the equilibria turn out to be not amenable to a qualitative analysis, we design a series of simulations to analyze the impact of key model's parameters on strategies and outcomes, as well as to assess the impact of myopia on them