The role of advertising in the choice between reselling and agency selling | Zendy

Sigue Simon | Zendy; Gromova Ekaterina | Zendy

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The role of advertising in the choice between reselling and agency selling

Author(s) -

Sigue Simon,

Gromova Ekaterina

Publication year - 2025

Publication title -

international transactions in operational research

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 1.032

H-Index - 52

eISSN - 1475-3995

pISSN - 0969-6016

DOI - 10.1111/itor.13351

Subject(s) - agency (philosophy) , business , advertising , channel (broadcasting) , microeconomics , marketing , economics , computer science , philosophy , epistemology , computer network

Abstract This article investigates the condition under which a manufacturer and a retailer in a two‐member channel should adopt reselling or agency selling. Three game‐theoretic models in which price and advertising decisions affect consumer demand are analyzed. Contrary to common belief about agency selling, we demonstrate that when manufacturer advertising greatly influences demand, reselling is the only feasible business model. Agency selling should be considered only when manufacturer advertising slightly impacts demand. Consequently, the manufacturer and retailer may prefer any of the three models and their preferences may differ. Agency selling can drive up retail prices and hurt channel members' profits.

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