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F11MKT300_Channels2_

# F11MKT300_Channels2_ - Place(Part Strategies Channel...

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Place (Part 2): Channel Strategies Channel Pricing Discussion: Managing brand/product image when selling through a channel Should a company that sell through a channel member also sell direct? Managing competition between channel partners

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1. Channel Pricing Question: What is the optimal Wholesale Price? Manufacturer Variable cost per unit=20 Retailer Customers Demand is Quantity=100 – Retail Price Retail Price (P) Wholesale Price (W)
Channel Pricing Manufacturer Variable cost per unit=20 Retailer Customers Q=100 – P Retail Price (P) Wholesale Price (W) Π M=(W-20)*Q =(W-20)(100-P) Π R=(P-W)*Q =(P-W)(100-P)

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Steps in Finding Optimal Wholesale Price Combination of backward induction and calculus 1. Start from retailer’s profit function. Differentiate retailer profit function with respect to price and set derivative to 0. Goal is to obtain an expression for optimal retail price P as a function of W
Step 1. Start from Retailer’s Profit Function P 100 - = Q P W P W P P W P Q W R + - - = - - = - = Π 2 100 100 ) 100 ( ) ( ) P ( 0 2 100 P = + - = Π W P d d R W W P 5 . 0 50 2 100 * + = + = Here we obtain the optimal retail price in terms of the wholesale price W. We need this to solve for the optimal W

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Steps in Finding Optimal Wholesale
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