The Influence of Efficient Consumer Response on Retailers Competition

Abstract

We examined the implications of a new grocery industry strategy, ECR, on retail competition and channel management in the context of a simple game theoretic model. Our main finding can be summarized in two results. First, we find that when two retailers are competing with each other, the introduction of ECR by both retailers is a Nash equilibrium. Thus, ECR, which is currently at an introductory stage, will be a prevalent strategy in the grocery industry. Second, we find that by introducing ECR, not only retailers but also manufacturers will get the benefit from ECR. This result justifies cooperation between manufacturers and retailers in the introduction of ECR.