| This dissertation is composed of four essays. In the first essay, we study pricing of two competing manufacturers who sell through a retailer maximizing the category profits. We find that, if demand is sufficiently price sensitive, even if it is continuous in retail prices, equilibrium manufacturer pricing is in mixed strategies, which we interpret as trade promotions. We find such trade promotions are unprofitable even if competitors don't match promotions, a result different from that in prior work. Finally, competitive trade promotions in our model act as a check on raising regular prices, and so competition is about choosing regular prices, not just formulating a promotion strategy.; In the second essay, we study competition between asymmetric manufacturers selling through a strategic retailer. We obtain results with managerial implications for employing promotions as defensive or offensive strategies. We find that unilateral promotions can be profitable for one brand depending on how the asymmetry is defined.; In the third essay, we explore the informational role of advertising in competitive promotions. One of the important results is that firms only advertise prices that are below the average unadvertised price. Thus, advertising can be viewed as a signal of low price so consumers purchase the advertised brand if only one brand is advertised. Our results reconcile the empirical evidence that many consumers are not aware of prices, but there are still non-informational promotions because of the existence of the zero search cost consumers. At the same time, the existence of the high search cost consumers gives firms an incentive to engage in informational promotions.; In the fourth essay, we examine the forces that influence a manufacturer's decision to complementing its existing distribution channel with a direct Internet channel. We find that the manufacturer's decision to adopting a hybrid channel is influenced by the strategic interplay of the retailer's margins on other brands in the product category, the retailer's clientele mix, and the price sensitivity of the brand loyal consumers. We show that adopting a hybrid distribution channel could help increase the profits of the manufacturer by either enhancing the retail support or price-discriminating the consumers. |
