The dark side of bilateral encroachment within a supply chain

It is broadly agreed that the opportunity of encroachment a viable strategy to increase profit. We consider supply chain in which one manufacturer can encroach by selling national brand products consumers directly, and retailer developing store products. The product more valued consumers, whereas incumbent retailing channel cost-efficient. Linear inverse demand functions are derived from consumer utility functions. assume two firms move simultaneously separately choose their strategies. then identify conditions under each firm should encroach. find strategic control role direct marketing eliminated retailer’s encroachment; hence, not establish unless sales actually occur. Contrary conventional wisdom, analytical results demonstrate certain bilateral form prisoner’s dilemma between retailer, i.e. Pareto optimal solution encroach, but for both firms. In addition, we could be avoided allowing first its strategy.