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This paper shows how analytic modeling research in the Marketing field is focused on answering questions of “How?” and “Why?” It describes the disciplines involved in analytic modeling; examines how the key criteria of parsimony and robustness help to define a good model; and discusses other goodness criteria, including appropriate use of analytic techniques, applicability of the model to institutionally rich, real-world problems, non-obvious results, generalizability, and ability to provide insight where other research techniques do not work. The paper defines and discusses key concepts in analytic models of distribution channels, including double marginalization, coordination, incentive alignment and contract design, strategic substitutability and complementarity, externalities, and principal–agent problems. Next, the paper summarizes research presented in the session on analytic models in channels at the Erin Anderson conference; and finally, the paper suggests avenues for future analytic modeling research. [ABSTRACT FROM AUTHOR]

Abstract Game-theoretic analyses of distribution channels have generated six widely held beliefs (we call them Channel Hypotheses) whose universal soundness has not been examined. To assess the validity of these Hypotheses, we develop a general, linear-demand model in which distributors face heterogeneity in demand, heterogeneity in costs, and any degree of intensity of inter-distributor competition. For ease of comparison, we nest the bilateral-monopoly model and the identical-distributors model within our general model. Our analysis reveals that the Channel Hypotheses do not generalize beyond the specific game-theoretic models from which they were derived. This lack of generality is critical, because these beliefs have led to intuitively appealing (but inadvertently misleading) strategic advice for managers and modeling advice for game theorists. From our general, linear-demand model, we derive six Channel Propositions that correct these accumulated errors of conceptualization and that generate a richer, more broadly applicable set of managerial and modeling implications. We also present a Channel-Modeling Proposition that we believe will help modelers avoid the errors of conceptualization described in this paper. [ABSTRACT FROM AUTHOR]

The existing marketing science literature on channels of distribution has emphasized pricing strategies that maximize either channel or manufacturer margin. This emphasis has implicitly assumed that optimal wholesale prices are independent of any fixed fees charged by the manufacturer. While this assumption is justified in a single-manufacturer, single-retailer world, it generally does not lead to manufacturer profit maximization in a world of competing retailers. In this paper we derive a manufacturer-optimal wholesale pricing strategy by simultaneously determining both elements of a two-part tariff (consisting of a wholesale price and a fixed fee). We show that the manufacturer will always prefer this “sophisticated” pricing strategy to one that maximizes either channel or manufacturer margin. We also show that both elements of the optimal tariff are functions of the absolute difference between retailer fixed costs. [ABSTRACT FROM AUTHOR]

This paper examines optimal interventions in the presence of externality-induced uncertainty. A regional model of three activities involving polluting, nonpolluting and pollution-abating industries is developed, and a Taylor series technique is utilized to represent a stochastic regional utility function. Optimal intervention policies in the forms of output or input taxes and subsidies are then deduced and analyzed. [ABSTRACT FROM AUTHOR]