Benefits of partial myopia in a durable product supply chain considering pricing and advertising

Abstract Consider a bilateral monopoly supply chain where a manufacturer distributes a durable product through a retailer to end consumers. This paper develops a differential game in which the manufacturer determines the advertising and the wholesale price while the retailer sets the retail price. Channel members are partially myopic when they only consider goodwill dynamics and disregard sales evolution. We derive and compare partially myopic and forward-looking strategies with the following observations: First, under decentralized scenario, partially myopic channel members get higher profits than the forward-looking ones, while the opposite result occurs in centralized scenario. Second, when channel members are partially myopic, the distribution channel can benefit from the strategic decentralization.