This research aims to provide insights into the determinants of channel profitability and the relative power in the channel by considering consumer demand and the interactions between manufacturers and retailers in an equilibrium model. We use the Nash bargaining solution to determine wholesale prices and thus how margins are split in the channel. Equilibrium margins are a function of demand primitives and of retailer and manufacturer bargaining power. Bargaining power is itself a function of exogenous retail and manufacturer characteristics. The parties' bargaining positions are determined endogenously from the estimated substitution patterns on the demand side. The more they have to lose in a negotiation relative to an outside option, the weaker the bargaining position.We use the proposed bargaining model to investigate the role of the three main factors that have been blamed for the power shift from manufacturers to retailers in recent years (firm size increases, store brand introductions, and service level differentiation). In our empirical analysis of the German market for coffee, we find that bargaining power varies among the different manufacturerretailer pairs. This result suggests that bargaining power is not an inherent characteristic of a firm but rather depends on the negotiation partner. We are able to confirm empirically previous theoretical findings that there can be cases where the slice of the pie that goes to one of the channel members may decrease but the overall pie increases and compensates for the smaller share of profits.

The increasing number of consumer goods and services offered in recent years suggests that product‐line extensions have become a favored strategy of product managers. A larger assortment, it is often argued, keeps customers loyal and allows firms to charge higher prices. There is disagreement, however, about the extent to which a longer product line translates into higher profits. We develop an econometric model derived from a game‐theoretic perspective that explicitly considers firms' use of product‐line length as a competitive tool. On the demand side, we analytically establish the link between consumer choice and the length of the product line. Based on our derivations, we include a measure of line length in the utility function to investigate consumer preference for variety using a brand‐level discrete‐choice model. The supply side is characterized by price and line length competition between oligopolistic firms. For the empirical analysis we use market‐level data for the yogurt category. We find that there are decreasing returns to product‐line length. Based on a series of “what‐if” experiments, we derive recommendations for effective product line decisions in a competitive environment.

We propose that the variety a brand offers often serves as a quality cue and thus influences which brand consumers choose. Specifically, brands that offer a greater variety of options that appear compatible and require similar skills tend to be perceived as having greater category expertise or core competency in the category, which, in turn, enhances their perceived quality and purchase likelihood. Six studies support this proposition and demonstrate that compared to brands which offer fewer products, (a) brands which offer increased compatible variety are perceived as having higher quality; (b) this effect is mediated by product variety's impact on perceived expertise; (c) the higher perceived quality produces a greater choice share of the higher variety brand, even among consumers who select options that multiple brands offer and (d) product variety also impacts post-experience perceptions of taste. The findings suggest that in addition to directly affecting brand choice share through influencing the fit with consumer preferences, product line length can also indirectly affect brand choice through influencing perceived brand quality.variety, consumer choice, quality cues, product line length

Advertising, Brand awareness, Perceived quality, Dynamic panel data methods, L15, C23, H37,

One alternative product innovation made of mulberry leaves is the mulberry leaves tea that served in a ready to drink pack. This alternative innovation is expected to increase the economic value of mulberry leaves. The product of mulberry leaves tea is made by adding 30% sappan wood of the total weight of mulberry tea in order to improve the color appearances of the tea. The purpose of this research is to analyze the consumer preferences on mulberry leaves tea as an antioxidant-enriched product. The consumer preferences on the aroma, color, and taste of mulberry tea were tested by 100 panelists. The results show that the top five important attributes of mulberry tea are color, aroma, taste, packaging, and price. In addition, the preferences test show that 48% of the panelist like the color (light brown) and the aroma of the tea (rather strong of lime aroma). The preference test also shows that 45% of the consumer is rather like the taste (a little bit sour). As a conclusion, in order to increase consumer preferences on the mulberry tea, the taste of the tea should be improved by conducting further research to determine the proper amount of lime used in the tea formulation. Field of Research: consumer preferences, product innovation, mulberry tea