Data-driven manufacturer-retailer collaboration under competition

Abstract

This research employs game theoretic models to investigate how and when data-driven collaborations between manufacturers and retailers are beneficial. In the models, two symmetric retailers each offer two products from two different manufacturers. Each manufacturer may choose to collaborate with one or both retailers through data-driven initiatives in providing retail value to the consumers. The results show that the main incentive behind these collaborations arise from the efficient allocation of resources. Surprisingly, greater brand differentiation reduces profit margins and the incentive to collaborate. We also find that market leaders can endogenously arise through data-driven collaborations.