A Differential Game of a Dual Distribution Channel

An infinite-horizon differential game between a manufacturer and a retailer is considered. The players control their marketing efforts, and the sales share of the online channel is the state of the system. The manufacturer seeks to maximize her profit made on both the indirect and direct channels and faces, aside from her marketing effort, a logistics cost of selling online. The retailer seeks to keep consumers buying offline through her effort. A feedback Nash equilibrium is identified and results are discussed.

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