The retailer?s brand promotion strategy under competition: The impact of supply uncertainty

While retailers are committed to promoting product brands to increase sales quantity and brand visibility, retailers are exposed to supply uncertainty. Therefore, we explore the brand promotion strategies of retailers in a competitive model. We then investigate the decision model under three different brand strategies and explore the equilibrium outcomes of stakeholders under supply uncertainty. In addition, we analyze and discuss social welfare under different scenarios. The results show that when the promotion cost is high (i.e., the cost effect dominates the market expansion effect), neither retailer promotes the product brand. When the promotion cost is low (i.e., the market expansion effect dominates the cost effect), both retailers tend to promote the product brands. When the promotion cost and market expansion match each other, only one retailer promotes the product brand becomes the equilibrium strategy. It is worth noting that when both retailers promote the product brand, the retailer falls into a prisoner's dilemma. In addition, we find that the supply uncertainty level diminishes the cost affordability and the motivation of retailers to promote the product brands. Interestingly, the supply uncertainty level reduces the possibility of retailers being in a prisoner's dilemma. Besides, market expansion (supply uncertainty) contributes to improving (diminishing) social welfare.

Automated summary

This study examines the brand promotion strategies of retailers in a competitive model and investigates the decision model and equilibrium outcomes of stakeholders under supply uncertainty. The results show that retailers are less likely to promote product brands when the promotion cost is high, but more likely to do so when the cost is low. When the promotion cost matches market expansion, only one retailer will promote the product brand. Supply uncertainty diminishes retailers' affordability and motivation to promote product brands, but reduces the likelihood of them being in a prisoner's dilemma. Additionally, market expansion improves social welfare while supply uncertainty diminishes it.