Reply To: Managing Channel Profits: Comment

We welcome Moorthy's Comment Moorthy, K. S. 1987. Managing channel profits: Comment. Marketing Sci.6 Fall 375--379.. It provides an opportunity to clarify several issues raised in our 1983 paper. That paper was motivated by one concern---channel coordination. We believed that channel members benefit from coordination and that many institutional arrangements, such as quantity discounts, are actually coordinating mechanisms. We developed a simple model to demonstrate our belief. For historical accuracy, McGuire and Staelin cited by Moorthy had already independently developed a useful model of duopolistic channel competition. Being unaware of their working paper, our model not surprisingly differed from theirs. Both papers provide important but different insights into channel management.