Assoiatio fo Ifomatio Systems AIS Eletoi Libay (AISeL) WHICEB 013 Poeedigs Wuha Iteatioal Cofeee o e-busiess 5-5-013 Stategi Remaufatuig Deisio i a Supply Chai with a Exteal Loal Remaufatue Xu Tiatia Shool of Maagemet Siee ad Egieeig, Najig Uivesity Xiao Tiaoju Shool of Maagemet Siee ad Egieeig, Najig Uivesity Shi Jig Shool of Maagemet Siee ad Egieeig, Najig Uivesity Follow this ad additioal woks at: http://aisel.aiset.og/whieb013 Reommeded Citatio Tiatia, Xu; Tiaoju, Xiao; ad Jig, Shi, "Stategi Remaufatuig Deisio i a Supply Chai with a Exteal Loal Remaufatue" (013). WHICEB 013 Poeedigs. Pape 11. http://aisel.aiset.og/whieb013/11 This mateial is bought to you by the Wuha Iteatioal Cofeee o e-busiess at AIS Eletoi Libay (AISeL). It has bee aepted fo ilusio i WHICEB 013 Poeedigs by a authoized admiistato of AIS Eletoi Libay (AISeL). Fo moe ifomatio, please otat elibay@aiset.og.
The Twelfth Wuha Iteatioal Cofeee o E-Busiess Emegig Opeatios & Sevies Maagemet Tak 837 Stategi Remaufatuig Deisio i a Supply Chai with a Exteal Loal Remaufatue Tiatia Xu 1, Tiaoju Xiao, Jig Shi Shool of Maagemet Siee ad Egieeig, Najig Uivesity, Najig, 10093 Chia Abstat: This pape develops a model fo emaufatuig deisios i a two-stage supply hai with oe maufatue, oe etaile ad oe exteal loal emaufatue, who ollets used poduts ad the epodues them ito a ew oe if the maufatue does ot joi i emaufatuig poess. This pape is diffeet fom most of the extat studies about emaufatuig beause they oside deisios of fims athe tha supply hais. We maily fous o the emaufatuig stategy of the maufatue whe thee is a loal emaufatue. We deive the equilibium esults fo all playes ad do some ompaative studies ude diffeet ases. We fid that podut substitutability a ivet the effet of maufatue s extesio deisio o the etaile s pofit. We also oside the effet of hael stutue by ompaig the deetalized hael with the etalized hael. We fid that the maufatue has a highe ietive to exted its podut lie i the etalized hael tha the deetalized hael; ad the ompetitio a stegthe its motivatio to exted the lie. Keywods: game theoy, podut lie, emaufatuig, supply hai maagemet 1. INTRODUCTION ION Remaufatuig efes to eoomi poess with eoveig the ed-of-life poduts, whih wee fist podued by oigial equipmet maufatue (OEM). Remaufatued podut ofte has the same futio as the ew oe but heape, so it s a good alteative hoie fo some osumes. It is well kow that, emaufatuig has a lowe podutio ost ad plays a impotat ole i eduig eviomet bude. Addig emaufatued podut is also a oveietly way to exted podut lie, whih a help OEM attat moe osumes ad elage the maket sale futhemoe. Howeve, a OEM may be ot willig to patiipate i emaufatuig beause emaufatued podut may aibalize sales of the highe-magi ew poduts, as well as eed a geat amout of moey to build a eessay evese hael. As a supply hai playe, OEM s deisio a be iflueed by othe patiipats, suh as etaile ad loal emaufatue. Thee exist some loal emaufatues, who have matue failities fo this poess ad will always take bak the ed-life poduts ad epodue them ito ew oes. These epodued poduts a aibalize the sales of the OEM s. Fo example, some Chiese mahie tool maufatues ae puzzled with emaufatuig deisios beause thee is a big ompay Catepilla extats the big pat of pofit i this idusty. Thus, it is vey impotat fo the OEM to make a tade-off betwee the emaufatuig o ot whe faig a outside ompetito. Chael stutues a also have some effets o the OEM s deisio. Havig a etaile a be effiiet, while they have advaed maketig stategy. Howeve, a maufatue just has its ow sale hael just like Dell. We will also oside diffeet haels' impat o the OEM s deisio. I the etalized settig, we will fist oside the supply hai without a loal emaufatue to see the aibalizatio effet i diffeet hael stutues. The we will look at the effet of the ompetitio fom a loal emaufatue if both sell 1 Coespodig autho. Email: xutiatia1988@hotmail.om (Tiatia Xu); xiaotj@ju.edu. (Tiaoju Xiao)
838 The Twelfth Wuha Iteatioal Cofeee o E-Busiess Emegig Opeatios & Sevies Maagemet Tak poduts themselves. We fist oside a situatio without a loal emaufatue, so the system a be modeled as a Stakelbeg game, whee the OEM is the leade ad the etaile is the followe. The, we will oside the effet of the ompetitio betwee the loal emaufatue ad OEM o equilibium outome. We have the majo fidigs if thee is a etaile i the distibutio hael. Both etail ad wholesale pies of the ew podut ae lowe if thee is emaufatued podut, ad the ompetitio will futhe deease the pies fo the ew oe. The OEM will have a highe ietive to exted podut lie if thee is a outside ompetito. Fom the ompaiso betwee the etalized ad the deetalized hael, we kow that if both OEM ad loal emaufatue use thei ow haels, the the OEM will pefe to patiipate i emaufatuig to avoid the ompetitio fom othe playe. The ompetitio is fiee i the etalized oe.. LITERATURE REVIEW Ou wok is losely elated to two ategoies of eseah, oe is emaufatuig deisio while the othe is podut lie desig stategy. Thee ae may papes disuss emaufatuig elated poblems, fo example, evese hael desig stategies [1], pie ad quatity deisios fo the emaufatued podut [], emaufatuig deisios ad so o. Savaska et al. [1] oside the evese hael seletio poblem ad give out a oodiatio mehaism to idue the best olletio effot fo the etaile. Ou pape is losely elated to emaufatuig deisio, whih is ofte osideed ude the two-peiod oditio [3-7]. Some of them did ot oside the diffeee betwee the emaufatued ad the ew oe. Majumde ad Goeevelt [3] oside the impat of ompetitio o the OEM s deisios both i the fist ad seod peiods. Othes talk about the emaufatued podut s aibalizatio effet o the ew podut. Debo et al. [4] thik about the podutio tehology seletio ad piig deisios fom a maufatue's view. Feguso ad Toktay [5] give out the oditio ude whih the moopolist maufatue will ot joi i emaufatuig. They also oside the maufatue s ety-deteet stategies whe faig the exteal emaufatuig ompetitio. Atasu et al. [7] thik that thee exists a gee segmet, while egad emaufatuig as a stategi maketig stategy. They show that pie disimiatio is a good stategy to defed the exteal ompetitio. All the papes study the deisios without osideig the etailes eatio. Sie thee ae always some iteatios betwee maufatues ad etailes, we will fous o the emaufatuig stategy i a supply hai. This pape is also elated to papes talkig about podut lie desig stategies. Moothy [8] osides a moopolist s podut lie desig ad piig deisios, the Villas-Boas [9] exteds the poblem i a distibutio hael ad gives out the oditio, ude whih the itemediay will ay all the poduts. Desai [10] the osides the effets of aibalizatio i a podut lie poblem. Podut lie poblems ae the osideed togethe with othe poblems, suh as diffeet osume hoie modes [11-1], diffeet itodutio sequee [13-15] ad advetisemet elated fatos ad so o. Liu ad Cui [16] oside the podut lie deisio i a supply hai with oe etaile ad oe maufatue. We oside the podut lie legth deisio of the OEM faig with a outside ompetito ad oe the impat of ompetitio o podut lie deisio. This pape will oside the podut extesio deisio of the OEM faig with the ompetitio fom loal emaufatue ude diffeet hael stutues. This pape otibutes to the liteatue by osideig the emaufatuig stategy i a supply hai with a exteal emaufatue. We maily fous o the iteatio amog the playes istead of deisios i diffeet peiods. Additioally, we ivestigate the effets of the ompetitio o the OEM s podut lie deisios. 3. THE BASIC MODEL We oside a supply hai with oe oigial equipmet maufatue (OEM), oe loal emaufatue ad
The Twelfth Wuha Iteatioal Cofeee o E-Busiess Emegig Opeatios & Sevies Maagemet Tak 839 oe etaile, whee all poduts ae sold to osumes though the etaile. Ad all playes ae doig deisios based o thei pofits. As we oly oside a sigle peiod, we assume the etus quatity ad demad ae idepedet of eah othe [17]. That is, we do ot oside the ostaits fom the demads of the fowad systems o the aquisitio quatity of ed-of life poduts. Sie the maket sale of the emaufatued podut is smalle tha the ew oe, this a be tue i a matue maket. Fistly, we oside a supply hai without a emaufatue to deive the optimal oditio, ude whih the OEM will ivest i emaufatuig. The OEM ad the etaile play a Stakelbeg game to deide the optimal pies. Whe thee is a loal emaufatue, the OEM s emaufatuig stategy may be diffeet beause poduts fom loal emaufatue a be egaded as a theat. The time sequee of this game is as follows: (i) The maufatue deides whethe to emaufatue the used podut o ot. (ii) If the OEM patiipates i emaufatuig, he deides the wholesale pies fo both ew ad emaufatued poduts; if he does ot patiipate i emaufatuig, the loal emaufatue jois the maket; ad they deide the wholesale pies simultaeously. (iii) The etaile deides the etail pies fo both poduts. We have the followig otatios: a i : the maket size fo podut i, i,, a > a ; d : the substitutability of the two poduts, 0 < d < 1; : uit emaufatuig ost, iludig aquisitio ost of used podut; : uit maufatuig ost of the ew podut; F : fixed ost whe OEM jois i emaufatuig; p : etail pie fo the ew podut whe thee is o emaufatued poduts; w : wholesale pie fo the ew podut whe thee is o emaufatued poduts; : the pofit futio of etaile whe thee is o emaufatued podut; : the pofit futio of OEM whe thee is o emaufatued podut; m : the pofit futio fo the etalized hael whe thee is o emaufatued poduts; : the pofit futio of playe j ( j R, M )whe OEM epodues; j : the pofit futio fo the etalized hael whe OEM epodues; C : the pofit futio of playe m ( m R, M, L ) whe loal emaufatue epodues; m1 : the pofit futio fo playe ( R, L ) i the etalized hael. Cj We assume that the emaufatued podut is distiguishable fom the ew podut, demad fo the ew podut is D ( p, p ) a p dp, while the demad fo emaufatued podut a be expessed as: D ( p, p ) a p dp. Hee, d meas podut substitutability, whee d 0 fully diffeet, while d 1 meas two podut ae meas they a be a fully substitutes fo eah othe. Whe thee is o emaufatued podut i the maket, we assume the demad fo the emaufatued oe as zeo [3] by settig p a dp, so the demad fo ew oe is: D( p) ( a da ) (1 d) p. Whe thee is oly oe podut i the maket, the pofit fo the etaile is ( p, w) D( p w), (1) whih is a oave futio of p, i.e., ( p, w) / p d < 0. By solvig the fist-ode a da w oditio ( p, w) / p 0 fo p, we obtai the best eatio futio p( w). (1 d) By osideig the eatio futio of the etaile, the pofit futio fo the OEM ( w, p) ( w ) D a be expessed as m
840 The Twelfth Wuha Iteatioal Cofeee o E-Busiess Emegig Opeatios & Sevies Maagemet Tak whih is a oave futio of a (1 d ) da pie w. Isetig (1 d ) 1 m ( w ) ( w )[ a da (1 d ) w ], () w. By solvig the fist-ode oditio, we a have the optimal wholesale w ito () ad etaile s eatio, we a have the equilibium pofit fo the OEM ad the optimal etail pie, futhemoe we a have the etaile s pofit m [ a (1 d) da ], (3) 8(1 d) [ a (1 d) da ]. (4) 16(1 d) 4. OEM S REMANUFACTURING STRATEGY 4.1. OEM patiipates i emaufatuig If the OEM patiipates i emaufatuig, the pofit futio of OEM a be expessed as ( p, p, w, w ) D ( w ) D ( w ) F, (5) M whee the fist (seod) tem mea pofit fom the ew (emaufatued) podut while the thid tem is the fixed ost fo emaufatuig, iludig evese hael ivestmet built ost, poess set up ost, admiistatio ost, ad so o. I this way, the etaile s pofit a be expessed as ( p, p, w, w ) D ( p w ) D ( p w ), (6) R By usig bakwad idutio tehique, we a solve the subgame pefet Nash equilibium (SPNE) of the Stakelbeg game, ad the extesio age as well i Popositio 1. Popositio 1. (i) Whe the fixed ost satisfy: A1 B1 (1 d ) (1 d) C1 0 < F < F1, the OEM will joi i 8(1 d ) emaufatuig, whee A1 a a aad, B1 a a d, C1 [ a (1 d ) da ] ; (ii) Whe the OEM jois i emaufatuig, the optimal wholesale pies fo the two poduts ae a a d d w (1 d ) (1 ) a ad (1 d ), w. (1 d ) Poof. With two poduts, the etaile deides both the etail pies at the same time. Sie the Hessia matix of ove ( p, p ) is R d d, whih is egative defiite followig fom 0 < d < 1. Solvig the fist-ode oditios / p 0 ad / p 0, we have the etaile s eatio futio R R a ad (1 d ) w a ad (1 d ) w p ( w ) ad p ( ) w. (7) d d Isetig p ( w ) ad p ( w ) ito (5), we a obtai ( w, w ). We a show that ( w, w ) is a M M R oave futio of ( w, w ). Solvig the fist ode oditios ( w, w ) / w 0 ad a ad (1 d ) M ( w, w ) / w 0, we a have w, (1 d ) a a d d w (1 d ) (1 ) M a ad w a ad w obtai the SPNE etail pies: p, p, ad equilibium pofits ( 1 d ) ( 1 d ) M. Futhe, we a a a aad (1 d )( a a d) F ; (8) 8(1 d )
The Twelfth Wuha Iteatioal Cofeee o E-Busiess Emegig Opeatios & Sevies Maagemet Tak 841 a a a a d a a d d R 16(1 d ) Compaig Equatio (3) with (8), we kow that if ( )(1 ) M m. (9) >, OEM will patiipate i emaufatuig, so we a have the extesio age fo OEM, that is, 0 < F < F. 1 Popositio 1 shows that OEM will patiipate i emaufatuig oly whe the fixed ost is ude etai amout. Sie the expessio of the emaufatuig bouday is omplex, we will ay out sesitivity aalysis o it late o. We a also see fom the equilibium wholesale pie fo the ew podut that it will iease with both maket sizes of the two poduts. O oe had, OEM may iease the ew podut s wholesale pie to gai a lage magial pofit if the ow maket sale ieases; o the othe had, whe the maket sale of the emaufatued oe ieases the demad fo the ew oe a be ieased as well fo substitutio effet. Ad the wholesale pie fo the emaufatued oe has the same effet. By diffeetiatig the equilibium wholesale pie with espet to d, we a have wholesale pie due to the elaged maket size. a a w / d > 0, whih meas that OEM will ieases (1 d) By ompaig the equilibium deisios befoe ad afte extesio, we have the followig. Coollay 1. Whe OEM patiipate i emaufatuig, the pies satisfy w < w ad p < p. Fom Coollay 1, we a see that both the etail ad wholesale pies ae lowe ude emaufatuig. As thee is a ompetitive podut i the maket, the etaile may wat to deease pie to attat moe osumes. The OEM may the ut pies of the poduts to ompesate the etaile. 4.. Loal emaufatue patiipates i emaufatuig Whe OEM does ot patiipate i emaufatuig, the loal emaufatue will do that. Ad we assume the loal emaufatue has its ow evese hael ad podutio apaity. Both of them sell thei poduts though a ommo etaile, i this way, the pofit fo the etaile a be expessed as (6). So the pofit futio fo the OEM is ( p, p, w, w ) D ( w ). (10) M 1 1 1 1 1 1 1 The pofit of the loal emaufatue is ( p, p, w, w ) D ( w ). (11) L1 1 1 1 1 1 1 Popositio summaizes the age, ude whih OEM will joi i emaufatuig if thee exists a loal emaufatue ad the wholesale pies. Popositio. (i) If thee is a loal emaufatue, OEM will joi i emaufatuig A1 (4 d ) [(4 d ) B1 4 C ](1 d ) whe 0 < F < F, whee C [ a ( a ) d ( d )] ; (ii) the 8(1 d )(4 d ) a ( a ) d wholesale pie fo the ew oe is w 1, while the wholesale pie fo the 4 d a ( a ) d emaufatued is w1. 4 d Poof: By isetig the eatio futios (7) ito (10) ad (11), we 1 1 obtai M 1 ( w1, w 1 ) ( w 1 )( a dw1 w 1 ) ; L1 ( w 1, w 1 ) ( w1 )( a dw 1 w1 ). By solvig the fist-ode oditios M 1( w1, w1 ) / w1 0 ad L1( w1, w1 ) / w1 0 fo ( w, w ), we a obtai the optimal wholesale pies fo both ew ad emaufatued podut: w1 ad w 1. Futhemoe, we a obtai
84 The Twelfth Wuha Iteatioal Cofeee o E-Busiess Emegig Opeatios & Sevies Maagemet Tak the equilibium etail pies p a a d w 1 1 (1 d ) M 1 ad [ a ( a ) d ( d )] (4 d ) L1 p [ a ( a ) d ( d )] (4 d ) a a d w 1 1 (1 d ), while the equilibium pofits ; (1). (13) By ompaig Equatio (8) with (1), we kow that if thee is a loal emaufatue, OEM will exted its podut lie whe >, that is 0 < F < F. M M 1 We a show the diffeees amog the wholesale pies ude diffeet oditios though umeial examples, ad default values of paametes ae used as follows: a 40, a 5, d 0.35,, ad 1.4. Figue 1 illustates the effet of substitutability o equilibium wholesale pies. Figue 1. New podut s wholesale pie vesus substitutability wholesale pie 70 60 50 40 w w 0.3 0.4 0.5 0.6 w 1 d As a be see i Figue 1, whe the loal emaufatue jois i emaufatuig, the wholesale pie fo the ew podut is lowe tha the OEM does itself. That is, whe thee is the ompetitio i the maket, both playes will deease the pie to attat moe osumes. Though, we have aleady show that the wholesale pie is highe whe thee is just oe podut i the maket, we a see fom Figue 1 that the diffeee betwee the wholesale pies ieases with podut substitutability. That is, whe podut substitutability is high, the wholesale pie diffeee is geat. To well udestad the effet of ompetitio, we defie Figue shows the effet of substitutability o F1. (4 d ) (1 d) C 4(1 d ) C 1 F 1 F F 1. 8(1 d )(4 d ) We a see fom Figue that the extesio age is wideed by the ompetitio. To avoid the aibalizatio fom the loal emaufatue, the OEM is willig to pay muh to edue the lost aused by the outside ompetito. We a also see that, F1 ieases with maket size, whih is obvious fo maket sale ieasig a help OEM to gai moe pofit. Whe podut substitutability is highe, the diffeee of the age of extesio beomes lage whe thee is a loal maufatue. As podut substitutability ieases, the ompetitio ieases, so OEM has a highe ietive to ivest i emaufatuig to gai a highe pofit. Figue 3 illustates the pofit fo the etaile ude diffeet oditios. Fistly, we oside the pofit fo the etaile if thee is o loal emaufatue. Whe podut substitutability is suffiietly low, havig two poduts fom OEM a make a highe pofit tha just holdig just ew oe. Sellig two diffeetiated poduts a help etaile attat moe osumes ad gai a highe pofit. Howeve, whe podut substitutability is high, just holdig oe podut is moe pofitable. Highe substituted emaufatued podut aibalizes the demad of the ew oe, while the magial pofit is lowe. So the pofit fo the etaile is lowe ude this oditio. Additioally, the etaile s pofit a be high if it sales poduts fom ot oly OEM but also the loal emaufatue. As podut lie extesio dampes the pie ompetitio, both OEM ad loal emaufatue edue thei pies to ompete fo maket, ad i this way the etaile a make a lage magial pofit though
The Twelfth Wuha Iteatioal Cofeee o E-Busiess Emegig Opeatios & Sevies Maagemet Tak 843 podut lie piig. F 1 etaile's pofit 700 600 600 500 400 300 a 35 a 5 500 400 300 R1 R 00 0.3 0.4 0.5 0.6 Figue. F1 vesus podut substitutability d 00 d 0.3 0.4 0.5 0.6 Figue 3. Retaile etaile s pofits vesus podut substitutability 5. REMANUFACTURING STRATEGY IN THE CENTRALIZED CHANNEL 5.1. Without emaufatued podut I the etalized ase, we fistly oside the oditio without emaufatuig. Ad the hael pofit a be expessed as ( p ) D ( p ) We a show that ( p ) is a oave futio of p. Thus, by solvig the fist-ode oditio, we a have a (1 ) the optimal etail pie ad d p. Isetig (1 d) p ito (14), we obtai the equilibium pofit [ a (1 d) a d]. (15) 4(1 d) 5.. OEM podues emaufatued podut If the maufatue podues the emaufatued poduts, it has to deide the etail pies fo both the ew ad the emaufatued poduts, simultaeously. The pofit futio fo the maufatue a be expessed as ( p, p ) D ( p ) D ( p ) F, (16) C whee the fist pat is the pofit of the ew podut ad the seod pat meas the emaufatued poduts pofit. Popositio 3 shows the oditio, ude whih OEM will take a pat i emaufatuig i the etalized hael. Popositio 3. Whe A1 (1 d ) B1 C1 ( 1 d) 0 < F < F3, the OEM will joi i emaufatuig i the 4( 1 d ) etalized oditio. Poof. Fom (16), we kow the Hessia matix ove ( p, p ) is egative defiite. Diffeetiatig ( p, p ) with espet to p ad p (14) espetively ad solvig the fist-ode oditio, we a have the equilibium etail pies fo both ew ad emaufatued poduts: a ad (1 d ) p. We a futhe obtai the equilibium pofit fo the maufatue. (1 d ) a (1 )( ) a aad d a a d C 4( 1 d ) F p a ad (1 d ) (1 d ) By ompaig equatio (15) with (17), we a have the followig extesio age 0 < F < F. 3 5.3. OEM does ot podue emaufatued podut If the OEM ad the loal emaufatue sell thei poduts though thei ow haels, we a obtai thei, (17)
844 The Twelfth Wuha Iteatioal Cofeee o E-Busiess Emegig Opeatios & Sevies Maagemet Tak pofit futios as followig CM ( p 1, p1) D 1( p 1 ), (18) CL ( p 1, p1) D1( p1 ). (19) Popositio 4. Whe emaufatuig i the etalized oditio. p A1 (4 d ) [(4 d ) B1 4 C ](1 d ) 0 < F < F, the OEM will joi i 4 4(1 d )( 4 d ) Poof. By solvig the fist-ode oditios of (18) ad (19), we a have the optimal etail pies a ( a ) d ad 4 d 1 the two playes CM CL p a ( a ) d, we a futhe have the equilibium pofits fo 4 d 1 [ a ( a ) d ( d )], (0) (4 d ) [ a ( a ) d ( d )]. (1) (4 d ) By ompaig (17) ad (0), we a have the extesio age. I the etal lie, we still defie the ompetitio effet by: (4 d ) (1 d) C1 4(1 d ) C F F4 F3, 4(1 d )(4 d ) whih has the same stutue as F1, but lage tha the ase i the deetalized oditio, that is F1 < F, whih meas the ompetitio effet is lage i the etalized hael as OEM will be the oly oe to bea the loss of ompetitio. By osideig Popositios 1,, 3, 4, we have Coollay, whih shows diffeees of extesio age i the diffeet bakgouds. Coollay. (i) If thee is o loal emaufatue: F1 < F ; (ii) If thee exists a loal maufatue: 3 F < F. 4 Fom Coollay, we kow that i the etalized oditio, the podut extesio age is lage tha the deetalized oditio. That is, OEM is moe likely to exted its lie i the etal hael, whih is beause i the deetalized hael OEM always beas all the extedig ost, so it has a lowe ietive to exted the lie. 6. CONCLUSIONS If OEM epodues a used podut, the demad of the ew poduts a be iflueed by podut substitutability. I this atile we exploe the oditio, ude whih OEM will take a pat i this poess with a outside ompetito. We fist oside this poblem i a deetalized hael with thee playes to see the effet of the ompetitio fom both iside ad outside. The we oside hael effet though a etalized ase. Ou aalysis gives some maageial isights fo supply hai playes. Fom the OEM s pespetive, it will have a highe ietive to exted the podut lie by addig a emaufatued podut if thee is a loal emaufatue i the maket. Futhemoe, if it deides sell podut itself istead of a itemediate etaile, he will be bette off extedig the podut lie. Fom the poit of the etaile, holdig two poduts fom idepedet maufatues a be pofitable. Howeve, whe thee is oly a OEM i the maket, sellig just ew oe is beefit fo the etaile whe the podut substitutability is lage. Hee we just assume that etaile has o powe but sells poduts fom the OEM. Noetheless, the etaile a be elutat whe holdig two poduts with lowe pofit tha just havig a ew oe. I the futue, we a oside the settig whee the etaile is poweful eough to hoose the poduts istead of hold the whole lie.
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