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This article builds an analytical framework for manufacturers developing rebate strategies under the chain to chain competition. We demonstrate that rebates are likely to be implemented by manufacturers in both more cost-effective and less cost-effective business environments. We show that manufacturers are more likely to use more cost-effective rebates than less cost-effective rebates when the price competition between two chains is intensified. Rebate can be a dominant strategy for both manufacturers and retailers under two conditions: the market with a small percentage of the rebate-sensitive segment, plus (1) fierce competition and more cost-effective rebates, or plus (2) less cost-effective rebates. Our research provides a reference frame to design price discrimination mechanisms and some management insights for manufacturers.

Manufacturer rebate strategy under chain to chain competition