A Negotiation Model for Inducing Higher Service in a Distribution Channel

Ricardo Ernst, Jose Ignacio López-Sánchez, David Urbano

    Research output: Contribution to journalArticleResearchpeer-review

    1 Citation (Scopus)

    Abstract

    This paper analyzes, in the context of negotiation, the problem of coordination and conflict resolution between the manufacturer (Seller) and the retailers (Buyers) for a two-tier inventory system. The retailers capture demand (from customers) and therefore are responsible for the level of service offered by the system. The larger the inventory that a retailer has of a particular product, the lower the probability of running out of stock and therefore, avoid the possibility of a lost sale for the manufacturer. A conflict arises (and therefore the negotiation process starts) when the manufacturer wants the retailer to increase the level of service while retailers are satisfied with the status quo. Using the Nash bargaining solution, we develop a theoretical framework that incorporates behavioral dimensions and predicts the outcome of "sharing" the profit. The results indicate the advantage of developing long term relationships among the members of the distribution channel to minimize the uncertainty and therefore the source of conflict. © 2008 Springer Science+Business Media B.V.
    Original languageEnglish
    Pages (from-to)499-517
    JournalGroup Decision and Negotiation
    Volume18
    DOIs
    Publication statusPublished - 1 Aug 2009

    Keywords

    • Collaborative seller-buyers
    • Game theory
    • Marketing
    • Negotiation
    • Operations

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