In this thesis, we formulate a two-stage screening model in which a national brand manufacturer (he) faces a retailer (she) who introduces her store brand and has private information on market demand. We first check the role of wholesale price and two-part tariff contracts in coordinating retailer's pricing decisions. We find that the two contract forms perform quite differently under information asymmetry. A separating equilibrium exists under the two-part tariff contract while only a pooling equilibrium can arise under the wholesale price contract. The manufacturer always prefers the two-part tariff contract while retailer may prefer it only under certain conditions. This is novel in the existing bilateral supply chain literature where wholesale price contracts are claimed to be...[ Read more ]

In this thesis, we formulate a two-stage screening model in which a national brand manufacturer (he) faces a retailer (she) who introduces her store brand and has private information on market demand. We first check the role of wholesale price and two-part tariff contracts in coordinating retailer's pricing decisions. We find that the two contract forms perform quite differently under information asymmetry. A separating equilibrium exists under the two-part tariff contract while only a pooling equilibrium can arise under the wholesale price contract. The manufacturer always prefers the two-part tariff contract while retailer may prefer it only under certain conditions. This is novel in the existing bilateral supply chain literature where wholesale price contracts are claimed to be preferred by the retailer. Moreover, the two-part tariff contract outperforms the wholesale price contract in terms of total channel profit and information rent. Our results can extend to the case that the retailer exerts marketing effort to boost the demand for national brand. In the presence of retailer's marketing effort, the manufacturer still prefers the two-part tariff contract while the retailer becomes more likely to prefer it. The equilibrium marketing effort levels under two contracts are downward distorted in asymmetric information. Besides, we find that positioning store brand close to the national brand may not benefit the retailer under information asymmetry given category demand is expandable.