Resource-based coalitions in marketing channels: A cooperative game theoretic analysis

Firms often enter strategic alliances in which each partner commits resources to achieve a common set of marketplace objectives. Firms in such coalitions can compete more effectively relative to relying on purely internal resources. These alliances may be vertical (firms operating at different levels of the value chain) or horizontal (firms competing at the same level of the value chain). Both forms coexist in many industries, with competing blocks of vertically/horizontally related firms that pool resources for mutual benefit.;The marketing strategy literature is largely silent on how multi-firm alliances may form endogenously in competitive markets. Channel cooperation is often examined in non-cooperative game theoretic frameworks focusing on strategies rather than outcomes and assuming symmetric firms at a single industry level. This dissertation develops a normative model for the endogenous formation of resource-based coalitions in marketing channels. It also tests experimentally how specific psychological biases may influence such coalition formation.;The normative contribution rests on a theoretical model of how different value-generating resource capabilities of both vertically- and horizontally-related firms should influence formation of horizontal and/or vertical coalitions. The scenario involves three upstream and three downstream firms in a marketing channel. We use a cooperative game theoretic solution concept (the Shapley value) to address how the joint gains realized by the coalition should optimally be divided given each partner's contribution to the coalition.;The empirical contribution involves four experiments examining the coalition formation behavior of focal subjects in a custom computer simulation game. Potential coalition partners are computerized "bots" programmed to respond using appropriate normative rules. Study 1 examines how a status quo bias (reluctance to exit one's own current alliance) inhibits formation of normatively appropriate coalitions. Study 2 investigates the effects of a poaching bias (reluctance or eagerness to break coalitions involving desirable partners). Study 3 addresses how predispositions regarding partnerships with horizontally versus vertically-related partners influence coalition formation. Study 4 tests selected propositions on how focal subjects choose coalitions and divide coalition gains given specific firm resource endowments and market parameters. We examine the managerial implications of the normative and the empirical work and outline future research priorities.