Analysis On The Relationship Of The Car Manufacturers And Retailers Under The Perspective Of Vertical Control

Vertical control theory is one of the basic theories of industrial organization. Because of the difference of the market structure, industrial structure and the level of economic development, theoretical study of longitudinal control has been the existence of differences and disputes. Auto industry of China is in the take-off stage. So the definition of vertical control strategy will have a great effect to the development of the automobile industry. Based on the study of scholars at home and abroad, through the model, the article analyzes the impacts of the price discounts incentive to the level of retail services, retail prices and the relationship between manufactures and retailers. Combining on the cases of car manufacturers and retailers in China, the paper studies the effects of incentives to the relationship between manufacturers and retailers of China. Main results of the research are shown as follows:(1) Summed up the vertical control of domestic and foreign scholars on the results of theoretical studies, especially for vertical control strategy, as well as the external form of vertical control synthesis.(2) According to a flexible pricing strategy, combined on the wholesale price discounts with retailers' level of service, through the analysis of the implementation of longitudinal control strategy, we find that the implementation of wholesale price discounts could reduce retail prices accordingly, improve service levels, which would also be useful to consumers, and this in itself can stimulate the elimination of unhealthy competition and the free-rider externalities, and have more conducive to market stability and the improvement of social welfare.(3) Combined on the car manufacturers and retailers' case of China, the paper studies the relationship between price incentives, both positive and negative role, and in accordance with the corresponding targeted analysis of issues, which has a certain theoretical and practical significance to the harmonious development of the automotive market and the relationship between the auto manufacturers and retailers of China.(4) For the relationship between auto manufacturers and retailers of China, combined with the model and case, the paper puts forward specific proposals to the effective use of incentives between manufacturers and retailers.