Essays on retail operations

The intensified competition that the retail industry faces with the increasing numbers of new players in both the local and global markets has forced retailers to critically examine and redesign their operations and marketing strategies. To remain competitive, many retailers have focused on the provision of enhanced customer experience and pursued practices of differentiation. In this dissertation comprising of three essays, we attempt to shed light on retail practices that enhance consumer valuation, on factors that affect store performance, and on temporal management of demand enhancing activities using both analytical and empirical methodologies. The aim of this research is to develop theoretical insights to help retailers understand their store performance and effectively manage strategies geared towards enhancing demand and consumer valuation about their product offerings. In the first essay, we focus on technology investments that can affect consumer valuation. We examine the impact of such investments in a duopoly setting in which retailers compete in prices and consumers can search among the two retailers. In the second essay, we focus on store performance and examine the impact of labor and traffic characteristics on different store performance metrics using proprietary data of a retail chain. In the third essay, we focus on general services that retailers could provide to enhance demand and examine their temporal management under competition and demand uncertainty

Simulated horizontal mergers in vertically related markets

Thesis (MCom)--Stellenbosch University, 2022.ENGLISH SUMMARY: A global trend of increasing retail concentration and a heightened concern about buyer power demand more sophisticated and flexible merger screening tools. Parametrisable merger simulation models that suitably account for the effects of bargaining competition may pose a solution. Thus, this dissertation examines the predicted effects o f retail consolidation in a vertically related market using the merger simulation tool developed by Tschantz and Froeb (2019). With the flat logit nested demand function for differentiated products of Boshoff e t a l. (2020), the predicted retail merger effects of five different bargaining and non-bargaining models for a 1 × 2 industry are evaluated. The primary contribution of this study is its unique application of Nashin-Shapley (NiS) bargains in the study of retail consolidation. It is novel in so far it compares the inherent implications of Nash-in-Nash (NiN) and NiS bargains for the appraisal of retail mergers. Pre-merger competitive outcomes with NiN predetermine a finding o f an anticompetitive merger. Contrarily, predictions with NiS as its starting point do not indicate that a merger would cause consumer harm, and therefore, would not be prohibited. In addition, the results suggest that retail consolidation consistently poses a viable option through which retailers can improve their profitability and bargaining positions. However, merger incentives are moderated by the competitiveness of an outside market.AFRIKAANSE OPSOMMING: ’n Globale tendens van toenemende konsentrasie in die kleinhandelsektor en ’n verhoogde kommer oor koopkrag verg noodsaaklikerwys meer gesofistikeerde en aanpasbare samesmelting siftingsmetodes. Parameteriseerbare modelle van gesimuleerde samesmeltings wat op ’n geskikte wyse van die effekte van b edinging e n mededinging rekening hou, mag ’n oplossing bied. Dus, bestudeer hierdie proefskrif die effek van konsolidasie in ’n vertikaal verwante kleinhandelsektor met die gebruik van die samesmelting-simulasiemetode van Tschantz en Froeb (2019). Met die gebruik van die “flat logit nested” vraagfunksie vir gedifferensieerde produkte van Boshoff et al. (2020) word die uitkomste van vyf verskillende bedinging en nie-bedinging modelle vir ’n 1 × 2 industrie evalueer. Die primêre bydra van hierdie studie is sy unieke toepassing van Nash-in-Shapley (NiS) bedinging in die bestudering van konsolidasie in die kleinhandelsektor. Die studie is oorspronklik aangesien hierdie aanwending ’n kritiese vergelyking van die inherente implikasies van Nash-in-Nash (NiN) en NiS bedinging vir die beoordeling van samesmeltings toelaat. Pre-samesmelting NiN-modelle genereer toestande van oordrewe mededinging en sal daarom ’n bevinding van ’n anti-mededingende samesmelting vooraf bepaal. In teenstelling, sal ’n kleinhandel-samesmelting met NiS as sy beginpunt nie skade aan die verbruiker daarstel nie en sal daarom nie verbied word nie. Boonop, suggereer hierdie resultate dat kleinhandel-samesmeltings deurgaans ’n lewensvatbare opsie waardeur kleinhandelaars hul winsgewendheid en bedingingsposisie kan verbeter, bied. Daarbenewens, word die aansporings om saamte smelt deur die mededingendheid van ’n buite-mark gemodereer.Master

Market Structures and Competition in System Markets

The strong complementarity between components of a system makes the competition in system markets qualitatively different from those in other markets. When there are multiple types of systems depending on the combinations of the components, there can be several kinds of competition in one system market. The interaction between these competitions and its implication for the market structure are examined in the first two chapters. Chapter 1 finds that the competition in mixed system markets lessens the competition between the original systems. Chapter 1 also finds that relatively low integration and dissolution costs make the competition between the original systems less fierce. Chapter 2 finds that the competition in original systems' retail markets intensifies the competition between the original systems. As a result of the interactions, consumer surplus is the lowest and social welfare is the highest when the mixed system markets are competitive and retail markets are monopolistic. The last chapter examines how the complementarity between components results in strategic abandoning of market power in system markets. In industries where components have strong complementarity with each other, competition in one component market directly affects competition in the other. In this situation, an integrated manufacturer may want to abandon its duopolistic position in one component market if this leads new entrants to the component market to adopt its other component, and the loss from giving up the duopolistic position in one component market is less than the gains from the increased market share of the other component market. Though both the duopolists may want to choose this strategy, it is also possible that the best response to the rival's strategic abandoning of one component market is to keep the duopolistic position in both component markets. This is because when the duopolists both give up one component market, market shares for them remain the same as if they kept their duopolistic positions in both component markets. If the costs for making the retained component compatible with the new entrants' components are high, the equilibrium is asymmetric

Exclusionary Minimum Resale Price Maintenance

An upstream manufacturer can use minimum resale price maintenance (RPM) to exclude potential competitors. RPM lets the incumbent manufacturer transfer profits to retailers. If entry is accommodated, upstream competition leads to fierce downstream competition and the breakdown of RPM. Hence, via RPM, retailers internalize the effect of accommodating entry on the incumbent's profits. Retailers may prefer not to accommodate entry; and, if entry requires downstream accommodation, entry can be deterred. We also discuss empirical and policy implications, as well as the exclusionary potential of other methods of sharing profits between upstream and downstream firms, such as slotting fees and revenue sharing

Search for a moving target in a competitive environment

We consider a discrete-time dynamic search game in which a number of players compete to find an invisible object that is moving according to a time-varying Markov chain. We examine the subgame perfect equilibria of these games. The main result of the paper is that the set of subgame perfect equilibria is exactly the set of greedy strategy profiles, i.e. those strategy profiles in which the players always choose an action that maximizes their probability of immediately finding the object. We discuss various variations and extensions of the model.Comment: 14 pages, 0 figure

Online Cashback Pricing: A New Affiliate Strategy for E-Business

This paper examines the impact of “cashback” mechanism on online merchants’ affiliate and pricing strategies. Through reimbursing a portion of the transactional amount to consumers in a form of cashback, merchants are able to practice second-degree price discrimination. We develop an analytical framework which explicitly considers the cost associated with the underlying promotional vehicle. We first identify the conditions under which affiliate strategy is profitable. Surprisingly, the promotional “low” price could be actually “high”, relative to the uniform price when cashback is absent. We also propose channel coordination as a remedy to mitigate market inefficiency caused by double marginalization. Finally, we extend our model to a duopoly setting and find that a merchant can benefit from its rival’s move into the cashback market. Interestingly, under certain conditions both merchants have no incentive to move alone but prefer its rival to do so

Rivals’ exit and vertical merger evaluation

We discuss a subset of vertical mergers, where the exercise of market power and the efficiencies enabled by a vertical merger reduce rivals' profits, making rivals' exit a potentially serious concern. Rivals' exit can fundamentally alter the welfare analysis of vertical mergers due to the reduction in product variety to consumers and the reduction in the number of competitors that would otherwise exert downward pricing pressure. An exit-inducing vertical merger might reduce welfare even if it is a welfare-enhancing merger absent exit. We present a theoretical framework to analyze vertical mergers that focuses on the possibility and consequences of exit, discuss the antitrust implications for merger evaluation, and provide examples. We argue that the possibility of rivals' exit should be an integral part of the analysis of vertical mergers.info:eu-repo/semantics/acceptedVersio