NDLI: Marketing objectives of retailers with differentiated goods: An evolutionary perspective

Content Provider	Springer Nature Link
Author	Xiao, Tiaojun Yu, Gang
Copyright Year	2006
Abstract	In the real world, revenue maximization behavior may prevail in various markets. To understand this phenomenon, we develop a two-population model with two-vertically integrated channels. Every channel consists of one manufacturer and many (a sufficiently large number of) retailers that sell products in different markets by adopting pure marketing objective strategies: profit maximization and revenue maximization. We study the marketing objective behaviors in the quantity-setting duopoly and the price-setting duopoly situations respectively from an indirect evolutionary point of view. In the quantity-setting duopoly situation, we find that whether the equilibrium is an evolutionarily stable strategy depends on the type of strategic interaction (substitutes or complements), relative unit cost, market scale, etc. We extend it to the case with continuous preferences. We argue that revenue maximization may be an evolutionarily stable strategy and profit maximization strategy may be unstable. Under proper conditions, revenue maximization behavior can coexist with profit maximization behavior. In the price-setting duopoly situation with linear demand functions, we find that profit maximization is always an evolutionarily stable strategy and revenue maximization behavior will gradually become extinct. The extended model has a similar result but the retailers may compromise the two pure strategies.
Starting Page	359
Ending Page	374
Page Count	16
File Format	PDF
ISSN	10043756
Journal	Journal of Systems Science and Systems Engineering
Volume Number	15
Issue Number	3
e-ISSN	18619576
Language	English
Publisher	Systems Engineering Society of China
Publisher Date	2006-01-01
Publisher Place	Beijing
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Evolutionary game theory ESS marketing objective complements and substitutes Systems and Information Theory in Engineering Game Theory/Mathematical Methods Operations Research/Decision Theory
Content Type	Text
Resource Type	Article
Subject	Control and Systems Engineering Information Systems

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