Ingene, Charles A., Mark E. Parry. 2004. Mathematical Models of Distribution Channels. Kluwer Academic Publishers, Dordrecht, The Netherlands. 568 pp. – Book Review

Ingene, Charles A., Mark E. Parry. 2004. Mathematical Models of Distribution Channels. Kluwer Academic Publishers, Dordrecht, The Netherlands. 568 pp. – Book Review

Intellectual Capital, Management Theory 0 Comment 45

Managing distribution channels has been a critical issue for businesses for a long time. In most
business-oriented literature, authors have maintained an empirical and prescriptive perspective, mostly
based on case studies. They have generally emphasized the benefits of coordination and collaboration.
Although appealing, that approach is not scientifically robust and has not kept practitioners free from
channel conflicts. Academics, on the other hand, have developed analytical models that sometimes produce
inconsistent results. In Mathematical Models of Distribution Channels, Ingene and Parry make an amazing
attempt to bring the two approaches together. Their goal is to create a unifying theory of distribution
channels. They treat the issue in depth and develop a cohesive body of principles. They methodically and
systematically address the key distribution-channel issues, articulating economic theories and drawing
innovative conclusions that challenge the commonly accepted principles.

By analyzing previous publications, the authors identify eight channel myths that commonly lead to
distorted conclusions. They see the first set of myths as the result of extrapolating from bilateral-monopoly
models that do not capture the essence of complex models. Ingene and Parry warn against assuming that
conclusions drawn from identical competitors can be generalized.
Other myths concern cost structure, channel breadth, aggregate demand, the number of retailers
in channel models, and the feasibility of coordinating channels when both levels have positive per-unit
margins. The authors conclude that channel coordination is not necessarily in the best interests of all the
members of the channel.
Ingene and Parry unveil the channel myths through rigorous mathematical analysis of a very comprehensive
model and its key dimensions: demand type, number of members in each level (manufacturers and
retailers), number of states of nature, competition dynamics, and wholesale-price policies.
The authors propose four essential criteria for building a consistent and scientifically robust theory
of distribution channels:

(1) Decisions should reflect the rational, maximizing behavior of economic actors;

(2) The theory should be aligned with empirical evidence to avoid impractical conclusions;

(3) The theory should contain simple models that can later be included in complex models in a coherent
manner; and

(4) Models should include all the key issues and not treat them as exogenous variables.
The book is aimed at a scholarly audience. The authors use sophisticated language and support their
ideas with knowledgeable and deep research in all the fields related to distribution channels. Readers
need backgrounds in economic theory and mathematical modeling and analysis. The authors base their
arguments on theoretical examples, so practitioners will need to connect their conclusions to real-life
problems.
Ingene and Parry’s proposed unifying theory of distribution channels opens the door for further academic
research to explore the issues they have raised and for field work to apply theory to real-life business
cases.
This book is an important contribution to marketing science. The authors critically review current
channel theories, propose a broad and innovative body of theories that encompass the real basic issues
and go beyond bilateral monopoly, and establish a foundation for rigorous scientific development of
distribution-channel models.

Book Review_Interfaces

Vol. 36, No. 3, May–June 2006, pp. 272–278

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Author

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Rudolf Rosas Flunger

Dr. Rudolf Rosas Flunger is an experienced management consultant and business executive. He has a track record of more than 20 years delivering substantial business results ranging from bottom-line improvement to broad organizational transformation. His professional background includes extensive experience in corporate strategy, investments analysis, pricing, sales and distribution and supply chain. Dr. Rudolf Rosas Flunger has broad international experience with a special focus in Latin America as he has worked for clients in Brazil, Argentina, Chile, Colombia, Peru and Venezuela. Additionally, he has been Professor in several Engineering Schools and is an international speaker as well as a member of the IEEE, PMI, System Dynamics Society, INFORMS. Dr. Rosas Flunger holds an Industrial Engineering Degree from UCAB (Caracas) as well as a MSc and PhD in Management Sciences from Université Paris Dauphine (joint program with École Polytechnique and École des Mines de Paris).

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