# Brand-Owners’ Exclusive Channel Strategies in Multitier Supply Chains: Effect of Contract Unobservability

^{1}

^{2}

^{*}

## Abstract

**:**

## 1. Introduction

## 2. Literature Review

#### 2.1. Channel Distribution in Supply Chains

#### 2.2. Exclusive Channel Strategies

#### 2.3. Contract Unobservability

## 3. Model

#### 3.1. Channel Structure

#### 3.2. Contract Unobservability

**Lemma 1.**

- (a)
- in structure F, ${p}_{ijk}^{FO}=\frac{(-1+\tau )(-28+\tau (-363+\tau (-1670+\tau (-3180+\tau (-2070+\tau (-57+200\tau \left)\right)\left)\right)\left)\right)}{16(1+\tau )(-2+(-7+\tau \left)\tau \right)(-8+\tau (-65+\tau (-123+\tau (25+43\tau \left)\right)\left)\right)}$,${s}_{ijk}^{FO}=\frac{(-1+\tau )(1+3\tau )(-12+\tau (-105+\tau (-239+\tau (-55+27\tau \left)\right)\left)\right)}{8(-2+(-7+\tau \left)\tau \right)(-8+\tau (-65+\tau (-123+\tau (25+43\tau \left)\right)\left)\right)}$, ${w}_{ij}^{FO}=\frac{(-1+\tau )(1+3\tau )(1+\tau (5+2\tau \left)\right)}{2(-8+\tau (-65+\tau (-123+\tau (25+43\tau \left)\right)\left)\right)}$,${\pi}_{i}^{FO}=-\frac{{(1+3\tau )}^{2}{(1+\tau (5+2\tau \left)\right)}^{2}(4+\tau (33+\tau (50+\tau (-68+19(-2+\tau )\tau \left)\right)\left)\right)}{8(1+\tau )(1+7\tau )(-2+(-7+\tau \left)\tau \right){(-8+\tau (-65+\tau (-123+\tau (25+43\tau \left)\right)\left)\right)}^{2}}$,${\pi}_{j}^{FO}=-\frac{(-1+\tau )(1+\tau (5+2\tau \left)\right){(4+\tau (49+\tau (198+\tau (280+19(2-3\tau )\tau \left)\right)\left)\right)}^{2}}{32(1+\tau )(1+7\tau ){(-2+(-7+\tau \left)\tau \right)}^{2}{(-8+\tau (-65+\tau (-123+\tau (25+43\tau \left)\right)\left)\right)}^{2}}$,and ${\pi}_{k}^{FO}=-\frac{(-1+\tau )(1+3\tau ){(1+\tau (5+2\tau \left)\right)}^{2}{(-4+\tau (-37+\tau (-87+19(-1+\tau \left)\tau \right)\left)\right)}^{2}}{64{(1+\tau )}^{2}(1+7\tau ){(-2+(-7+\tau \left)\tau \right)}^{2}{(-8+\tau (-65+\tau (-123+\tau (25+43\tau \left)\right)\left)\right)}^{2}}$.
- (b)
- in structure R, ${p}_{ijk}^{RO}=\frac{-28+\tau (-107+\tau (-9+\tau (248+\tau (18+\tau (-171+(51-2\tau \left)\tau \right)\left)\right)\left)\right)}{8(-2+3(-1+\tau \left)\tau \right)(8+3(-1+\tau \left)\tau \right(1+\tau \left)\right(-7+2\tau \left)\right)}$,${s}_{ijk}^{RO}=\frac{(-1+\tau )(12+\tau (57+\tau (60+\tau (-41+16(-3+\tau )\tau \left)\right)\left)\right)}{4(-2+3(-1+\tau \left)\tau \right)(8+3(-1+\tau \left)\tau \right(1+\tau \left)\right(-7+2\tau \left)\right)}$, ${w}_{ij}^{RO}=\frac{(-1+\tau )(1+\tau )(-1+(-2+\tau \left)\tau \right)}{8+3(-1+\tau )\tau (1+\tau )(-7+2\tau )}$,${\pi}_{i}^{RO}=\frac{(-1+\tau ){(1+\tau )}^{2}{(-1+(-2+\tau \left)\tau \right)}^{2}(4+\tau (13+\tau (2+\tau (-13+2\tau \left)\right)\left)\right)}{4(1+3\tau )(-2+3(-1+\tau \left)\tau \right){(8+3(-1+\tau \left)\tau \right(1+\tau \left)\right(-7+2\tau \left)\right)}^{2}}$,${\pi}_{j}^{RO}=\frac{(-1+\tau )(1+\tau )(1+2\tau )(-1+(-2+\tau \left)\tau \right){(4+\tau (13+\tau (2+\tau (-13+2\tau \left)\right)\left)\right)}^{2}}{16(1+3\tau ){(2-3(-1+\tau \left)\tau \right)}^{2}{(8+3(-1+\tau \left)\tau \right(1+\tau \left)\right(-7+2\tau \left)\right)}^{2}}$,and ${\pi}_{k}^{RO}=-\frac{{(-1+(-2+\tau \left)\tau \right)}^{2}(-1+{\tau}^{2}){(4+\tau (13+\tau (2+\tau (-13+2\tau \left)\right)\left)\right)}^{2}}{32(1+3\tau ){(2-3(-1+\tau \left)\tau \right)}^{2}{(8+3(-1+\tau \left)\tau \right(1+\tau \left)\right(-7+2\tau \left)\right)}^{2}}$.
- (c)
- in structure P, ${p}_{ijk}^{PO}=-\frac{(-1+\tau )(-112+\tau (-456+\tau (-402+\tau (201+\tau (229+(-37+\tau \left)\tau \right)\left)\right)\left)\right)}{8(-4+3(-1+\tau \left)\tau \right)(16+3(-1+\tau \left)\tau \right(-14+(-11+\tau )\tau \left)\right)}$,${s}_{ijk}^{PO}=\frac{2(-1+\tau )(1+\tau )(6+\tau (18+\tau (3+(-12+\tau \left)\tau \right)\left)\right)}{(-4+3(-1+\tau \left)\tau \right)(16+3(-1+\tau \left)\tau \right(-14+(-11+\tau )\tau \left)\right)}$, ${w}_{ij}^{PO}=\frac{(-1+\tau )(1+\tau )(-4+(-9+\tau \left)\tau \right)}{32+6(-1+\tau )\tau (-14+(-11+\tau \left)\tau \right)}$,${\pi}_{i}^{PO}=\frac{(-1+\tau ){(1+\tau )}^{2}(-4+(-9+\tau \left)\tau \right)(-2+(-3+\tau \left)\tau \right)(8+\tau (24+\tau -18{\tau}^{2}+{\tau}^{3}\left)\right)}{8(1+3\tau )(-4+3(-1+\tau \left)\tau \right){(16+3(-1+\tau \left)\tau \right(-14+(-11+\tau )\tau \left)\right)}^{2}}$,${\pi}_{j}^{PO}=\frac{{(1+\tau )}^{2}(2+\tau -4{\tau}^{2}+{\tau}^{3}){(8+\tau (24+\tau -18{\tau}^{2}+{\tau}^{3}\left)\right)}^{2}}{8(1+3\tau ){(4-3(-1+\tau \left)\tau \right)}^{2}{(16+3(-1+\tau \left)\tau \right(-14+(-11+\tau )\tau \left)\right)}^{2}}$,and ${\pi}_{k}^{PO}=-\frac{{(-2+(-3+\tau \left)\tau \right)}^{2}(-1+{\tau}^{2}){(8+\tau (24+\tau -18{\tau}^{2}+{\tau}^{3}\left)\right)}^{2}}{32(1+3\tau ){(4-3(-1+\tau \left)\tau \right)}^{2}{(16+3(-1+\tau \left)\tau \right(-14+(-11+\tau )\tau \left)\right)}^{2}}$.

**Lemma 2.**

- (a)
- in structure F, ${p}_{ijk}^{FU}=\frac{(-1+\tau )(14+\tau (175+\tau (714+953\tau )\left)\right)}{32(-4+\tau (-49+\tau (-191+7\tau (-31+11\tau \left)\right)\left)\right)}$,${s}_{ijk}^{FU}=\frac{(-1+\tau )(1+3\tau )(6+\tau (55+123\tau \left)\right)}{16(-4+\tau (-49+\tau (-191+7\tau (-31+11\tau \left)\right)\left)\right)}$, ${w}_{ij}^{FU}=\frac{(-1+\tau )(1+3\tau )(1+4\tau )(1+5\tau )}{4(-4+\tau (-49+\tau (-191+7\tau (-31+11\tau \left)\right)\left)\right)}$,${\pi}_{i}^{FU}=\frac{(1-\tau ){(1+3\tau )}^{2}(1+4\tau ){(1+5\tau )}^{2}(2+\tau (19+43\tau \left)\right)}{32(1+7\tau ){(4+\tau (49+\tau (191+7(31-11\tau \left)\tau \right)\left)\right)}^{2}}$, ${\pi}_{j}^{FU}=\frac{(1-\tau ){(1+3\tau )}^{2}(1+5\tau ){(2+\tau (19+43\tau \left)\right)}^{2}}{128(1+7\tau ){(4+\tau (49+\tau (191+7(31-11\tau \left)\tau \right)\left)\right)}^{2}}$,and ${\pi}_{k}^{FU}=\frac{(1-\tau )(1+3\tau ){(1+5\tau )}^{2}{(2+\tau (19+43\tau \left)\right)}^{2}}{256(1+7\tau ){(4+\tau (49+\tau (191+7(31-11\tau \left)\tau \right)\left)\right)}^{2}}$.
- (b)
- in structure R, ${p}_{ijk}^{RU}=\frac{(-1+\tau )(7+10\tau )}{8(-4+\tau (-3+4\tau \left)\right)}$, ${s}_{ijk}^{RU}=\frac{3+\tau -4{\tau}^{2}}{4(4+(3-4\tau \left)\tau \right)}$, ${w}_{ij}^{RU}=\frac{-1+{\tau}^{2}}{-8-6\tau +8{\tau}^{2}}$,${\pi}_{i}^{RU}=\frac{(1-\tau ){(1+\tau )}^{2}(1+2\tau )}{8(1+3\tau ){(4+(3-4\tau \left)\tau \right)}^{2}}$, ${\pi}_{j}^{RU}=\frac{{\left(1+2\tau \right)}^{2}(1-{\tau}^{2})}{16(1+3\tau ){(4+(3-4\tau \left)\tau \right)}^{2}}$, and ${\pi}_{k}^{RU}=\frac{{\left(1+2\tau \right)}^{2}(1-{\tau}^{2})}{32(1+3\tau ){(4+(3-4\tau \left)\tau \right)}^{2}}$.
- (c)
- in structure P, ${p}_{ijk}^{PU}=\frac{(-1+\tau )(14+\tau (72+\tau (115+58\tau )\left)\right)}{8(-8+\tau (-36+\tau (-39+2\tau (5+11\tau \left)\right)\left)\right)}$, ${s}_{ijk}^{PU}=\frac{(-1+\tau )(1+\tau )(3+\tau (12+11\tau \left)\right)}{-16+2\tau (-36+\tau (-39+2\tau (5+11\tau )\left)\right)}$, ${w}_{ij}^{PU}=\frac{(-1+\tau )(1+\tau )(2+3\tau )(2+5\tau )}{4(-8+\tau (-36+\tau (-39+2\tau (5+11\tau \left)\right)\left)\right)}$, ${\pi}_{i}^{PU}=\frac{(1-\tau ){(1+\tau )}^{2}(1+2\tau )(2+3\tau )(2+5\tau )(2+\tau (8+7\tau \left)\right)}{16(1+3\tau ){(8+\tau (36+\tau (39-2\tau (5+11\tau \left)\right)\left)\right)}^{2}}$,${\pi}_{j}^{PU}=\frac{(1-\tau ){(1+\tau )}^{2}(1+2\tau ){(2+\tau (8+7\tau \left)\right)}^{2}}{16(1+3\tau ){(8+\tau (36+\tau (39-2\tau (5+11\tau \left)\right)\left)\right)}^{2}}$, and ${\pi}_{k}^{PU}=\frac{{\left(1+2\tau \right)}^{2}(1-{\tau}^{2}){(2+\tau (8+7\tau \left)\right)}^{2}}{32(1+3\tau ){(8+\tau (36+\tau (39-2\tau (5+11\tau \left)\right)\left)\right)}^{2}}$.

## 4. Exclusive Channel Strategies

#### 4.1. Exclusive Channel Strategies under Contract Observability

**Proposition 1.**

- (a)
- ${w}_{1a}^{FO}<{w}_{1a}^{RO}\le {w}_{1a}^{PO}$,
- (b)
- ${s}_{1ax}^{FO}<{s}_{1ax}^{RO}\le {s}_{1ax}^{PO}$,
- (c)
- ${p}_{1ax}^{FO}<{p}_{1ax}^{RO}\le {p}_{1ax}^{PO}$.

**Proposition 2.**

- (a)
- ${\pi}_{i}^{FO}<{\pi}_{i}^{RO}\le {\pi}_{i}^{PO}$,
- (b)
- ${\pi}_{j}^{FO}<{\pi}_{j}^{PO}\le {\pi}_{j}^{RO}$,
- (c)
- ${\pi}_{k}^{FO}<{\pi}_{k}^{PO}\le {\pi}_{k}^{RO}$.

**Proposition 3.**

- (a)
- ${\Pi}_{S}^{FO}<{\Pi}_{S}^{RO}$; ${\Pi}_{S}^{FO}<{\Pi}_{S}^{PO}$,
- (b)
- ${\Pi}_{S}^{RO}\ge {\Pi}_{S}^{PO}$ if $0\le \tau \le {\tau}_{1}$; otherwise, ${\Pi}_{S}^{RO}<{\Pi}_{S}^{PO}$, where ${\tau}_{1}=0.76$.

#### 4.2. Exclusive Channel Strategies under Contract Unobservability

**Proposition 4.**

- (a)
- ${w}_{1a}^{FU}<{w}_{1a}^{RU}\le {w}_{1a}^{PU}$,
- (b)
- ${s}_{1ax}^{FU}<{s}_{1ax}^{PU}\le {s}_{1ax}^{RU}$,
- (c)
- ${p}_{1ax}^{FU}<{p}_{1ax}^{PU}\le {p}_{1ax}^{RU}$.

**Proposition 5.**

- (a)
- ${\pi}_{i}^{FU}<{\pi}_{i}^{RU}\le {\pi}_{i}^{PU}$,
- (b)
- ${\pi}_{j}^{FU}<{\pi}_{j}^{PU}\le {\pi}_{j}^{RU}$,
- (c)
- ${\pi}_{k}^{FU}<{\pi}_{k}^{RU}\le {\pi}_{k}^{PU}$.

**Proposition 6.**

- (a)
- ${\Pi}_{S}^{FU}<{\Pi}_{S}^{RU}$; ${\Pi}_{S}^{FU}<{\Pi}_{S}^{PU}$,
- (b)
- ${\Pi}_{S}^{PU}>{\Pi}_{S}^{RU}$ if $0\le \tau <{\tau}_{2}$; otherwise, ${\Pi}_{S}^{PU}\le {\Pi}_{S}^{RU}$, where ${\tau}_{2}=0.70$.

#### 4.3. Effects of Contract Unobservability

**Proposition 7.**

- (a)
- ${w}_{1a}^{IO}\ge {w}_{1a}^{IU}$, ${s}_{1ax}^{IO}\ge {s}_{1ax}^{IU}$ and ${p}_{1ax}^{IO}\ge {p}_{1ax}^{IU}$,
- (b)
- ${\pi}_{i}^{IO}\le {\pi}_{i}^{IU}$ if $\tau \le {\tau}_{3}^{I}$; otherwise, ${\pi}_{i}^{IO}>{\pi}_{i}^{IU}$,
- (c)
- ${\pi}_{j}^{IO}\le {\pi}_{j}^{IU}$ if $\tau \le {\tau}_{4}^{I}$; otherwise, ${\pi}_{j}^{IO}>{\pi}_{j}^{IU}$,
- (d)
- ${\pi}_{k}^{IO}\le {\pi}_{k}^{IU}$,
- (e)
- ${\Pi}_{S}^{IO}\le {\Pi}_{S}^{IU}$ if $\tau \le {\tau}_{5}^{I}$, otherwise ${\Pi}_{S}^{IO}>{\Pi}_{S}^{IU}$.

## 5. Effects of Channel Substitutability

**Proposition 8.**

## 6. Conclusions

## Author Contributions

## Funding

## Institutional Review Board Statement

## Informed Consent Statement

## Data Availability Statement

## Acknowledgments

## Conflicts of Interest

## Appendix A. Derivation of Equilibrium under Contract Observability

## Appendix B. Derivation of Equilibrium under Contract Unobservability

## Appendix C. Proofs

**Proof of Proposition 1.**

**Proof of Proposition 2.**

**Proof of Proposition 3.**

**Proof of Proposition 4.**

**Proof of Proposition 5.**

**Proof of Proposition 6.**

**Proof of Proposition 7.**

**Proof of Proposition 8.**

## References

- Niu, B.; Li, Q.; Chen, L. Exclusive vs. competitive retailing: Overseas vaccine supplier’s channel selection considering profit and social responsibility objectives. Comput. Ind. Eng.
**2020**, 144, 106499. [Google Scholar] [CrossRef] - Sanofi Sanofi and Translate Bio Expand Collaboration to Develop mRNA Vaccines across All Infectious Disease Areas. Available online: https://www.sanofi.com/en/media-room/press-releases/2020/2020-06-23-04-59-00-2051681 (accessed on 10 February 2023).
- Cai, G.; Dai, Y.; Zhou, S.X. Exclusive channels and revenue sharing in a complementary goods market. Market. Sci.
**2012**, 31, 172–187. [Google Scholar] [CrossRef] - ZDNET Apple, AT&T Had Five-Year Exclusive iPhone Deal but Have the Terms since Changed? Available online: https://www.zdnet.com/article/apple-at-t-had-five-year-exclusive-iphone-deal-but-have-the-terms-since-changed/ (accessed on 10 February 2023).
- JD.com Corporate Blog Oneplus Partners with JD.com. Available online: https://jdcorporateblog.com/premium-smartphone-maker-oneplus-signs-long-term-exclusive-partnership-with-jd-com/ (accessed on 8 January 2023).
- Caesarstone Caesarstone Signs Exclusivity Agreement with IKEA US. Available online: https://ir.caesarstone.com/news/news-details/2013/Caesarstone-Signs-Exclusivity-Agreement-with-IKEA-US/default.aspx (accessed on 8 January 2023).
- Zhuo, X.; Wang, F.; Niu, B. Brand-owners’ vertical and horizontal alliance strategies facing dominant retailers: Effect of demand substitutability and complementarity. Omega
**2021**, 103, 102449. [Google Scholar] [CrossRef] - McAfee, R.P.; Schwartz, M. Opportunism in multilateral vertical contracting: Nondiscrimination, exclusivity, and uniformity. Am. Econ. Rev.
**1994**, 84, 210–230. [Google Scholar] [CrossRef] - Li, X.; Liu, Q. Contract unobservability and downstream competition. Manuf. Serv. Oper. Manag.
**2021**, 23, 1468–1482. [Google Scholar] [CrossRef] - Liu, B.; Yu, Y.; Guo, X. Simpler and better: Supply chain contracting in the presence of contract unobservability and upstream competition. Transp. Res. Part E Logist. Transp. Rev.
**2021**, 154, 102478. [Google Scholar] [CrossRef] - He, P.; He, Y.; Xu, H. Channel structure and pricing in a dual-channel closed-loop supply chain with government subsidy. Int. J. Prod. Econ.
**2019**, 213, 108–123. [Google Scholar] [CrossRef] - Chen, Z.; Wu, S.; Govindan, K.; Wang, X.; Chin, K.; Martíınez, L. Optimal pricing decision in a multi-channel supply chain with a revenue-sharing contract. Ann. Oper. Res.
**2022**, 318, 67–102. [Google Scholar] [CrossRef] - Cattani, K.D.; Gilland, W.G.; Swaminathan, J.M. Coordinating traditional and internet supply chains. In Handbook of Quantitative Supply Chain Analysis: Modeling in the E-Business Era; Simchi-Levi, D., Wu, S.D., Shen, Z., Eds.; Springer: Boston, MA, USA, 2004; pp. 643–677. [Google Scholar]
- Tsay, A.A.; Agrawal, N. Modeling conflict and coordination in multi-channel distribution systems: A review. In Handbook of Quantitative Supply Chain Analysis: Modeling in the E-Business Era; Simchi-Levi, D., Wu, S.D., Shen, Z., Eds.; Springer: Boston, MA, USA, 2004; pp. 557–606. [Google Scholar]
- Wang, C.; Leng, M.; Liang, L. Choosing an online retail channel for a manufacturer: Direct sales or consignment? Int. J. Prod. Econ.
**2018**, 195, 338–358. [Google Scholar] [CrossRef] - Chen, J.; Zhang, H.; Sun, Y. Implementing coordination contracts in a manufacturer Stackelberg dual-channel supply chain. Omega
**2012**, 40, 571–583. [Google Scholar] [CrossRef] - Pun, H.; Chen, J.; Li, W. Channel strategy for manufacturers in the presence of service freeriders. Eur. J. Oper. Res.
**2020**, 287, 460–479. [Google Scholar] [CrossRef] - Zhang, C.; Li, Y.; Ma, Y. Direct selling, agent selling, or dual-format selling: Electronic channel configuration considering channel competition and platform service. Comput. Ind. Eng.
**2021**, 157, 107368. [Google Scholar] [CrossRef] - Abhishek, V.; Jerath, K.; Zhang, Z.J. Agency selling or reselling? Channel structures in electronic retailing. Manag. Sci.
**2015**, 62, 2259–2280. [Google Scholar] [CrossRef] - Zhang, S.; Zhang, J. Agency selling or reselling: E-tailer information sharing with supplier offline entry. Eur. J. Oper. Res.
**2020**, 280, 134–151. [Google Scholar] [CrossRef] - Zhang, P.; He, Y.; Shi, C.V. Retailer’s channel structure choice: Online channel, offline channel, or dual channels? Int. J. Prod. Econ.
**2017**, 191, 37–50. [Google Scholar] [CrossRef] - Nie, J.; Zhong, L.; Yan, H.; Yang, W. Retailers’ distribution channel strategies with cross-channel effect in a competitive market. Int. J. Prod. Econ.
**2019**, 213, 32–45. [Google Scholar] [CrossRef] - Giri, B.C.; Bardhan, S.; Maiti, T. Coordinating a three-layer supply chain with uncertain demand and random yield. Int. J. Prod. Res.
**2016**, 54, 2499–2518. [Google Scholar] [CrossRef] - Islam, S.M.S.; Hoque, M.A.; Hamzah, N. Single-supplier single-manufacturer multi-retailer consignment policy for retailers’ generalized demand distributions. Int. J. Prod. Econ.
**2017**, 184, 157–167. [Google Scholar] [CrossRef] - Lan, Y.; Li, Y.; Papier, F. Competition and coordination in a three-tier supply chain with differentiated channels. Eur. J. Oper. Res.
**2018**, 269, 870–882. [Google Scholar] [CrossRef] - Li, W.; Chen, J. Manufacturer’s vertical integration strategies in a three-tier supply chain. Transp. Res. Part E Logist. Transp. Rev.
**2020**, 135, 101884. [Google Scholar] [CrossRef] - McGuire, T.W.; Staelin, R. An industry equilibrium analysis of downstream vertical integration. Mark. Sci.
**1983**, 2, 161–191. [Google Scholar] [CrossRef] - Zhang, R.; Liu, B.; Wang, W. Pricing decisions in a dual channels system with different power structures. Econ. Model.
**2012**, 29, 523–533. [Google Scholar] [CrossRef] - Li, T.; Zhang, R.; Liu, B. Pricing decisions of competing supply chains under power imbalance structures. Comput. Ind. Eng.
**2018**, 125, 695–707. [Google Scholar] [CrossRef] - Feng, Q.; Lu, L.X. Supply chain contracting under competition: Bilateral bargaining vs. Stackelberg. Prod. Oper. Manag.
**2013**, 22, 661–675. [Google Scholar] [CrossRef] - O’Brien, D.P.; Shaffer, G. Vertical control with bilateral contracts. RAND J. Econ.
**1992**, 23, 299–308. [Google Scholar] [CrossRef] - Doganoglu, T.; Inceoglu, F. Buyback contracts to solve upstream opportunism. Eur. J. Oper. Res.
**2020**, 287, 875–884. [Google Scholar] [CrossRef] - Coughlan, A.T.; Wernerfelt, B. On credible delegation by oligopolists: A discussion of distribution channel management. Manag. Sci.
**1989**, 35, 226–239. [Google Scholar] [CrossRef] - Ha, A.Y.; Tian, Q.; Tong, S. Information sharing in competing supply chains with production cost reduction. Manuf. Serv. Oper. Manag.
**2017**, 19, 246–262. [Google Scholar] [CrossRef] - Ingene, C.A.; Parry, M.E. Bilateral monopoly, identical distributors, and game-theoretic analyses of distribution channels. J. Acad. Mark. Sci.
**2007**, 35, 586–602. [Google Scholar] [CrossRef] - Xu, Y.; Wang, J.; Cao, K. Logistics mode strategy of firms selling fresh products on e-commerce platforms with private brand introduction. J. Retail. Consum. Serv.
**2023**, 73, 103306. [Google Scholar] [CrossRef] - Guan, Z.; Zhang, X.; Zhou, M.; Dan, Y. Demand information sharing in competing supply chains with manufacturer-provided service. Int. J. Prod. Econ.
**2020**, 220, 107450. [Google Scholar] [CrossRef] - Ha, A.Y.; Tong, S. Contracting and information sharing under supply chain competition. Manag. Sci.
**2008**, 54, 701–715. [Google Scholar] [CrossRef] - Deng, W.; Feng, L.; Zhao, X.; Lou, Y. Effects of supply chain competition on firms’ product sustainability strategy. J. Clean. Prod.
**2020**, 275, 124061. [Google Scholar] [CrossRef]

**Figure 1.**Three typical channel structures: (

**a**) Flexible structure; (

**b**) Exclusive retailing-channel structure; (

**c**) Exclusive purchasing-channel structure.

**Figure 2.**Profits of the supply-chain members and the entire supply chains in a flexible structure. (

**a**) Suppliers’ profit; (

**b**) Brand-owners’ profit; (

**c**) Retailers’ profit; (

**d**) Supply chains’ profit.

Papers | Three-Tier Supply Chain | Channel Structures | Perspective of Research Subjects | Theme |
---|---|---|---|---|

He et al. [11], Wang et al. [15] | × | Dual-channel supply chains | Manufacturer | A manufacturer’s choice of direct and indirect sales channels |

Chen et al. [16], Pun et al. [17], Zhang et al. [18] | × | Single-channel supply chain; dual-channel supply chain | Manufacturer | A manufacturer’s choice of direct and indirect sales channels |

Abhishek et al. [19] | × | Dual-channel supply chains | Retailer | A retailer’s choice of agency selling and reselling channel strategy |

Zhang and Zhang [20] | × | Single-channel supply chains; dual-channel supply chains | Retailer | A retailer’s choice of agency selling and reselling channel strategy |

Zhang et al. [21] | × | Single-channel supply chains; dual-channel supply chain | Retailer | A retailer’s choice of online-and-offline channel strategy |

Nie et al. [22] | × | Dual-channel supply chains | Retailer | A retailer’s choice of online-and-offline channel strategy |

Giri et al. [23] | √ | Single-channel supply chain | Supply chain coordination | Channel coordination/Pareto improvement |

Islam et al. [24] | √ | Multi-channel supply chain (a supplier, a manufacturer, and multiple retailers) | Manufacturer | A manufacturer-managed consignment policy |

Lan et al. [25] | √ | Dual-channel supply chain (a manufacturer, two distributors, and a retailer) | Supply chain coordination | Competition between two distributors; coordination/Pareto improvement |

Li and Chen [26] | √ | Dual-channel supply chain (two suppliers, one manufacturer, and two retailers) | Supply chain coordination | A manufacturer’s vertical integration strategies |

This paper | √ | Multichannel supply chains (two suppliers, two brand-owners and two retailers) | Brand-owners | Brand-owners’ exclusive channel strategies; contract unobservability |

Notation | Interpretation |
---|---|

Indices | |

$i,j$$\mathrm{and}k$ | $\mathrm{Indices}i\in \left\{1,2\right\}$$,j\in \left\{a,b\right\},$$\mathrm{and}k\in \{x,y\}$$\mathrm{represent}\mathrm{supplier}i$$,\mathrm{BO}j$$\mathrm{and}\mathrm{retailer}k$, respectively. |

$O$$\mathrm{and}U$ | $\mathrm{Superscripts}O$$\mathrm{and}U$ represent the observable and unobservable cases, respectively. |

$F$$,R$$\mathrm{and}P$ | $\mathrm{Superscripts}F$$,R$,$\mathrm{and}P$ represent structures F, R, and P, respectively. |

Parameters | |

$\tau $ | Level of channel substitutability. |

$N$ | The number of available channels. |

${\alpha}_{ijk}$ | $\mathrm{The}\mathrm{consumer}\u2019\mathrm{s}\mathrm{preference}\mathrm{for}\mathrm{product}i$$\mathrm{sold}\mathrm{through}\mathrm{channel}ijk$. |

Decision and calculated variables | |

${w}_{ij}$ | $\mathrm{Supplier}i$$\u2019\mathrm{s}\mathrm{wholesale}\mathrm{price}\mathrm{sold}\mathrm{to}\mathrm{BO}j$. |

${s}_{ijk}$ | $\mathrm{BO}j$$\u2019\mathrm{s}\mathrm{wholesale}\mathrm{price}\mathrm{of}\mathrm{product}i$$\mathrm{sold}\mathrm{to}\mathrm{retailer}k$. |

${p}_{ijk}$ | $\mathrm{Retail}\mathrm{price}\mathrm{of}\mathrm{channel}ijk$. |

${d}_{ijk}$ | $\mathrm{Product}\mathrm{demand}\mathrm{of}\mathrm{channel}ijk$. |

${\pi}_{i},{\pi}_{j}$$\mathrm{and}{\pi}_{k}$ | $\mathrm{Profit}\mathrm{of}\mathrm{supplier}i$$,\mathrm{BO}j$,$\mathrm{and}\mathrm{retailer}k$, respectively. |

${\mathsf{\Pi}}_{S}$ | Profit of supply-chain system. |

Disclaimer/Publisher’s Note: The statements, opinions and data contained in all publications are solely those of the individual author(s) and contributor(s) and not of MDPI and/or the editor(s). MDPI and/or the editor(s) disclaim responsibility for any injury to people or property resulting from any ideas, methods, instructions or products referred to in the content. |

© 2023 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https://creativecommons.org/licenses/by/4.0/).

## Share and Cite

**MDPI and ACS Style**

Xiong, M.; Zhuo, X.
Brand-Owners’ Exclusive Channel Strategies in Multitier Supply Chains: Effect of Contract Unobservability. *Sustainability* **2023**, *15*, 7004.
https://doi.org/10.3390/su15087004

**AMA Style**

Xiong M, Zhuo X.
Brand-Owners’ Exclusive Channel Strategies in Multitier Supply Chains: Effect of Contract Unobservability. *Sustainability*. 2023; 15(8):7004.
https://doi.org/10.3390/su15087004

**Chicago/Turabian Style**

Xiong, Minghua, and Xiaopo Zhuo.
2023. "Brand-Owners’ Exclusive Channel Strategies in Multitier Supply Chains: Effect of Contract Unobservability" *Sustainability* 15, no. 8: 7004.
https://doi.org/10.3390/su15087004