How Should Retailers Behave in Category Captain Arrangements? A Game-Theoretic Analysis

Recent studies have recognized that today's category management collaborations include so called category captain arrangements. Category captains are key suppliers who advise retailers how to manage entire categories. The objective of category captain arrangements is to reduce retailers' costs through leveraging key suppliers' resources and capabilities. However, despite the strong recognition that category captains may act in an opportunistic manner, little is known about how such behaviour can be impeded. We follow the suggestion of previous research that theoretical/conceptual studies are needed to investigate opportunistic behaviour in category captain arrangements. We develop a game-theoretic model and show that a Nash equilibrium exists if the retailer monitors and threatens the category captain with status demotion and the category captain does not behave opportunistic. The paper concludes with an analysis of several constellations of supplier-retailer relationships and implications for retailers how the equilibrium strategy could be implemented in the identified situations.