exposed venture capital competitor ties and entrepreneurial innovation this study investigates the impact of early relationships on innovation at entrepreneurial firms prior research has largely focused on the benefits of network ties documenting the many advantages that accrue to firms embedded in a rich network of interorganizational relationships in contrast we build on research emphasizing potential drawbacks to examine how competitive exposure enabled by powerful intermediaries can inhibit innovation we develop the concept of competitive information leakage which occurs when firms are indirectly tied to their competitors via shared intermediary organizations to test our theory we examine every relationship between entrepreneurial firms and their venture capital investors in the minimally invasive surgical device segment of the medical device industry over a 22 year period we find that indirect ties to competitors impede innovation and that this effect is moderated by several factors related to the intermediary s opportunities and motivation to leak important information

competitive cross subsidization this paper analyzes competitive pricing policies by multiproduct firms facing heterogeneous buying patterns we show that cross subsidization arises when firms have comparative advantages on different products but are equally efficient overall firms earn a profit from multi stop shoppers by charging positive margins on their strong products but as price competition for one stop shoppers drives total margins down to zero they price weaker products below cost banning below cost pricing leads to higher profits and higher prices for one stop shoppers and may reduce consumer surplus as well as total social welfare

optimal pricing and return policies for perishable commodities this paper considers the pricing decision faced by a producer of a commodity with a short shelf or demand life a hierarchical model is developed and the results of the single period inventory model are used to examine possible pricing and return policies the paper shows that several such policies currently in effect are suboptimal these include those where the manufacturer offers retailers full credit for all unsold goods or where no returns of unsold goods are permitted the paper also demonstrates that a policy whereby a manufacturer offers retailers full credit for a partial return of goods may achieve channel coordination but that the optimal return allowance will be a function of retailer demand therefore such a policy cannot be optimal in a multi retailer environment it is proven however that a pricing and return policy in which a manufacturer offers retailers a partial credit for all unsold goods can achieve channel coordination in a multi retailer environment this article was originally published in marketing science volume 4 issue 2 pages 166 176 in 1985

estimation of consumer demand with stock out based substitution an application to vending machine products the occurrence of temporary stock outs at retail is common in frequently purchased product categories available empirical evidence suggests that when faced with stock outs consumers are often willing to buy substitute items an important implication of this consumer behavior is that observed sales of an item no longer provide a good measure of its core demand rate sales of items that stock out are right censored while sales of other items are inflated because of substitutions knowledge of the true demand rates and substitution rates is important for the retailer for a variety of category management decisions such as the ideal assortment to carry how much to stock of each item and how often to replenish the stock the estimated substitution rates can also be used to infer patterns of competition between items in the category in this paper we propose methods to estimate demand rates and substitution rates in such contexts we develop a model of customer arrivals and choice between goods that explicitly allows for possible product substitution and lost sales when a customer faces a stock out the model is developed in the context of retail vending an industry that accounts for a sizable part of the retail sales of many consumer products we consider the information set available from two kinds of inventory tracking systems in the best case scenario of a perpetual inventory system in which times of stock out occurrence and cumulative sales of all goods up to these times are observed we derive maximum likelihood estimates mles of the demand parameters and show that they are especially simple and intuitive however state of the art inventory systems in retail vend ing provide only periodic data i e data in which times of stock out occurrence are unobserved or missing for these data we show how the expectation maximization em algorithm can be employed to obtain the mles of the demand parameters by treating the stock out times as missing data we show an application of the model to daily sales and stocking data pooled across multiple beverage vending machines in a midwestern u s city the vending machines in the application carry identical assortments of six brands since the number of parameters to be estimated is too large given the available data we discuss possible restrictions of the consumer choice model to accomplish the estimation our results indicate that demand rates estimated naively by using observed sales rates are biased even for items that have very few occurrences of stock outs we also find significant differences among the substitution rates of the six brands the methods proposed in our paper can be modified to apply to many nonvending retail settings in which consumer choices are observed not their preferences and choices are constrained because of unavailability of items in the choice set one such context is in store grocery retailing where similar issues of information availability arise in this context an important issue that would need to be dealt with is changes in the retail environment caused by retail promotions

the visible hand demand effects of recommendation networks in electronic markets online commercial interactions have increased dramatically over the last decade leading to the emergence of networks that link the electronic commerce landing pages of related products to one another our paper conjectures that the explicit visibility of such product networks can alter demand spillovers across their constituent items we test this conjecture empirically using data about the copurchase networks and demand levels associated with more than 250 000 interconnected books offered on amazon com over the period of one year while controlling for alternative explanations of demand correlation using a variety of approaches our findings suggest that on average the explicit visibility of a copurchase relationship can lead to up to an average threefold amplification of the influence that complementary products have on each others demand levels we also find that newer and more popular products use the attention they garner from their network position more efficiently and that diversity in the sources of spillover further amplifies the demand effects of the recommendation network our paper presents new evidence quantifying the role of network position in electronic markets and highlights the power of basing virtual shelf position on consumer preferences that are explicitly revealed through shared purchasing patterns this paper was accepted by pradeep chintagunta marketing

chapter 4 competitive marketing strategies game theoretic models publisher summary this chapter reviews the key developments in the understanding of competitive marketing strategies product price advertising and distribution competition are all addressed while the emphasis is on models the chapter surveys the empirical literature as well there is a significant amount of empirical work to report but the ratio of theoretical to empirical work is nevertheless unpleasantly large much progress has been made in the last ten years or so in the study of competitive marketing strategies most of this chapter has been theoretical using simple models of firm and consumer behavior these models serve the function of demonstrating rigorously the existence of certain effects factors which need to be considered in analyzing real world competition

retail pricing and clearance sales sellers of new products are faced with having to guess demand conditions to set price appropriately but sellers are able to adjustprice over time and to learn from past mistakes additionally it is not necessary that all goods be sold with certainty it is sometimes better to set a high price and to risk no sale this process is modeledto explain retail pricing behavior and the time distribution of transactions prices start high and fall as a function of time on theshelf the initial price and rate of decline can be predicted and depends on thinness of the market the proportion of customers who are window shoppers and other observable characteristics copyright 1986 by american economic association

agricultural market integration in the oecd a gravity border effect approach abstract this paper uses the border effect estimate from a gravity model to assess the level of agricultural market trade integration among 22 oecd countries for the 1994 2003 period empirical analysis confirms that the use of a gravity equation derived from theory in the estimation of border effect matters a representative estimate of the border effect shows that crossing a national border within the oecd induces an average trade reduction effect of a factor 13 this average value masks differences that are quite substantial in market integration with value for intra eu trade being higher while that for trade between the central and eastern european countries ceecs is lower the data show a process of strong integration in all the country trade combinations involving ceecs however quite surprisingly the intra ceec and oecd ceec integration processes are almost twice as strong as those in the eu ceec combination finally the equivalent tariffs implied by the estimated border effects are not implausible compared to the actual range of direct protection measures

price dispersion and loss leader pricing evidence from the online book industry in this paper we develop a theoretical model to analyze the pricing strategies of competing retailers with asymmetric cross selling capabilities when product demand changes our results suggest that retailers with better opportunities for cross selling have higher incentives to adopt loss leader pricing on high demand products than retailers with low cross selling capabilities as a result price dispersion of a product across retailers rises when its demand increases the predictions of our model are consistent with the empirical evidence from the online book retailing industry using product breadth as a proxy for cross selling capability we find that retailers with high cross selling capabilities reduce prices on best sellers more aggressively than retailers with low cross selling capabilities as a result price dispersion increases when a book makes it to the best seller list and the increase is mainly driven by the difference in pricing behavior between retailers with different cross selling capabilities our empirical results are robust against a number of alternative explanations

optimal category pricing with endogenous store traffic we propose a dynamic programming framework for retailers of frequently purchased consumer goods in which the prices affect both the profit per visit in the current period and the number of visitors i e store traffic in future periods we show that optimal category prices in the infinite horizon problem also maximize the closed form sum of a geometric series allowing us to derive meaningful analytical results modeling the linkage between category prices and future store traffic fundamentally changes optimal pricing policy optimal pricing must balance current profits against future traffic under general conditions optimal long run prices are uniformly lower across all categories than those that maximize current profits this result explains the empirical generalization that category demand in grocery stores is inelastic parameterizing profit per visit and store traffic reveals that as future traffic becomes more sensitive to price retailers should increasingly lower current prices and sacrifice current profits we also determine how the burden of drawing future traffic to the store should be distributed across categories this is the foundation for a new taxonomy of category roles

imperfect price discrimination and welfare we develop a model in which a monopolist uses differences across consumers in their valuation of time to imperfectly price discriminate though it is customary to analyse price discrimination problems by the calculus of variations after postulating a continuum of types we assume a finite number of types and exploit the geometry and duality of the contract set and the structure of the programming specification we analyse in detail the qualitative properties of the model s solution and show by construction that our results exhaust the implications of the model for equilibrium contract pairs we show that imperfect discrimination is not bounded in welfare terms between perfect discrimination and single price monopoly and that the deadweight loss consumer surplus and output comparisons between single price monopoly and imperfect discrimination are ambiguous

optimal price and advertising policy for a convenience goods retailer convenience goods are bought without much consideration or effort on the part of the consumer buyers don t try to get the best bargain when purchasing individual convenience items instead they adapt their store choice habits so that they can expect on average good value for money in the long run store choice is governed by aggregate information which is received on the price levels of stores this is embodied in store price images a store price image is defined in the subsequent paper as a perceived difference between the store s price level and a reference level that consumers expect of stores about which they have no particular information store price images are learnt adaptively over time we propose a theoretical model of store price image adaptation and a two stage sales response model according to the latter a store s price image and advertising determine the number of customers attracted per period sales per visit however depend only on the prices actually observed in the store for this sales model we have studied the optimal price and advertising policy making simple assumptions of cost our main interest is the interaction between optimal advertising and price image it turns out that image improvement is achieved mainly through pricing increased advertising follows only after the price image has been improved therefore as long as the price image is poor relative to some optimal equilibrium level a larger portion of the marketing budget should be allocated to lower prices rather than to advertising in phases where the price image declines towards the equilibrium however heavier advertising is profitable

the competitive newsboy we consider a competitive version of the classical newsboy problem in which a firm must choose an inventory or production level for a perishable good with random demand and the optimal solution is a fractile of the demand distribution and investigate the impact of competition upon industry inventory a splitting rule specifies how initial industry demand is allocated among competing firms and how any excess demand is allocated among firms with remaining inventory we examine the relation between equilibrium inventory levels and the splitting rule and provide conditions under which there is a unique equilibrium our most general result is that if all excess demand is reallocated i e there is perfect substitutability then competition never leads to a decrease in industry inventory

estimating the effects of global patent protection in pharmaceuticals a case study of quinolones in india under the trips agreement wto members are required to enforce product patents for pharmaceuticals the debate about the merits of this requirement has been extremely contentious many low income economies claim that patent protection for pharmaceuticals will result in substantially higher prices for medicines with adverse consequences for the health and well being of their citizens on the other hand research based global pharmaceutical companies argue that prices are unlikely to rise significantly because most patented products have therapeutic substitutes in this paper we empirically investigate the basis of these claims central to the ongoing debate is the structure of demand for pharmaceuticals in poor economies where because health insurance coverage is so rare almost all medical expense are met out of pocket using a detailed product level data set from india we estimate key price and expenditure elasticities and supply side parameters for the fluoroquinolones sub segment of the systemic anti bacterials i e antibiotics segment of the indian pharmaceuticals market we then use these estimates to carry out counterfactual simulations of what prices profits and consumer welfare would have been had the fluoroquinolone molecules we study been under patent in india as they were in the u s at the time our results suggest that concerns about the potential adverse welfare effects of trips may have some basis we estimate that in the absence of any price regulation or compulsory licensing the total annual welfare losses to the indian economy from the withdrawal of the four domestic product groups in the fluoroquinolone sub segment would be on the order of u s 450 million or about 73 of the sales of the entire systemic anti bacterials segment in 2000 of this amount foregone profits of domestic producers constitute roughly 50 million or 11 the overwhelming portion of the total welfare loss therefore derives from the loss of consumer welfare in contrast the profit gains to foreign producers in the absence of any price regulation are estimated to be only around 53 million per year

does bait and switch really benefit consumers while the field of marketing science has long been interested in the effects of promotional efforts public policy issues involving illegal marketer fraud and deception have generally not been addressed in this body of work one key exception to this generalization is a marketing science article suggesting that the practice of bait and switch may be beneficial to consumers and furthermore that the federal trade commission should investigate revising its standards to legitimize this practice gerstner and hess 1990 this finding and recommendation seemed so significant that it is surprising that the recommendation has not to date been explored in greater detail in this paper we further explore the impact of the two components of bait and switch out of stock and upselling we do this by using moorthy s 1993 theoretical modeling framework to systematically extend and assess the gerstner and hess model we find that the previously reported increase in consumer welfare that arises from allowing out of stock conditions at retailers is actually due to the utility created by salespersons explaining product features and benefits not by the out of stock thus the ramifications of both our legal and modeling analyses are that deceptive bait and switch practices result in harm to consumers and should not be legalized our paper concludes by proposing worthwhile modeling issues for further exploration in addition we suggest that our procedure for analyzing public policy issues by exploring the confluence of law consumer behavior and marketing models can serve as a useful exemplar for further contributions to public policy by marketing scientists

managing channel profits a channel of distribution consists of different channel members each having his own decision variables however each channel member s decisions do affect the other channel members profits and as a consequence actions a lack of coordination of these decisions can lead to undesirable consequences for example in the simple manufacturer retailer consumer channel uncoordinated and independent channel members decisions over margins result in a higher price paid by the consumer than if those decisions were coordinated in addition the ensuing suboptimal volume leads to lower profits for both the manufacturer and the retailer this paper explores the problems inherent in channel coordination we address the following questions what is the effect of channel coordination what causes a lack of coordination in the channel how difficult is it to achieve channel coordination what mechanisms exist which can achieve channel coordination what are the strengths and weaknesses of these mechanism what is the role of nonprice variables e g manufacturer advertising retailer shelf space in coordination does the lack of coordination affect normative implications from in store experimentation can quantity discounts be a coordination mechanism are some marketing practices actually disguised quantity discounts we review the literature and present a simple formulation illustrating the roots of the coordination problem we then derive the form of the quantity discount schedule that results in optimum channel profits this article was originally published in marketing science volume 2 issue 3 pages 239 272 in 1983

origin of alliance portfolios entrepreneurs network strategies and firm performance alliance portfolios are ubiquitous and influential for firm performance extant research addresses attributes of high performing alliance portfolios but not how executives originate such portfolios

cyclic pricing by a durable goods monopolist in the model of this paper a monopoly seller of a durable good holds periodic sales as a means of price discrimination a new cohort of consumers enters the market in each period interested in purchasing the good either immediately or after a delay within each cohort consumers vary in their tastes for the good under broad conditions the seller will vary the price over time in most periods he will charge a price just low enough to sell immediately to consumers with a high willingness to pay periodically however he will drop the price far enough to sell to an accumulated group of consumers with a low willingness to pay

does globalization affect growth evidence from a new index of globalization the study develops an index of globalization covering its three main dimensions economic integration social integration and political integration using panel data for 123 countries in 1970 2000 it is analysed empirically whether the overall index of globalization as well as sub indexes constructed to measure the single dimensions affect economic growth as the results show globalization indeed promotes growth the dimensions most robustly related with growth refer to actual economic flows and restrictions in developed countries although less robustly information flows also promote growth whereas political integration has no effect

asymmetric wholesale pricing theory and evidence asymmetric pricing or asymmetric price adjustment is the phenomenon where prices rise more readily than they fall we offer and provide empirical support for a new theory of asymmetric pricing in wholesale prices wholesale prices may adjust asymmetrically in the small but symmetrically in the large when retailers face cost of price adjustment such retailers will not adjust prices for small changes in their costs manufacturers then see a region of inelastic demand where small wholesale price changes do not translate into commensurate retail price changes the implication is asymmetrica small wholesale price increase is more profitable because manufacturers will not lose customers from higher retail prices yet a small decrease is less profitable because it will not lower retail prices hence there is no extra revenue from greater sales for larger changes this asymmetry in the behavior of wholesale price vanishes as the price adjustment cost is compensated by the increase in retailers revenue resulting from correspondingly large retail price changes we present a formal economic model of a channel with forward looking retailers and cost of price adjustment test the derived propositions on the behavior of manufacturer prices using a large supermarket scanner data set and find that the results are consistent with the predictions of our theory we then discuss the implications for asymmetric pricing channels and cost of price adjustment literatures as well as public policy

can bait and switch benefit consumers we present a model that leads to an equilibrium with characteristics similar to the following stylized facts observed in retail markets a retailers advertise only selected brands b often low priced advertised brands are understocked c in store promotions are biased towards more expensive substitute brands together these practices constitute illegal bait and switch is this phenomenon necessarily harmful to consumers and to the economy we show that bait and switch can benefit consumers because utility is created through in store promotions and price competition is enhanced this suggests that the ftc investigate further its ban on bait and switch

stock wars inventory competition in a two echelon supply chain with multiple retailers this paper studies the competitive and cooperative selection of inventory policies in a two echelon supply chain with one supplier andn retailers stochastic demand is monitored continuously retailers incur inventory holding and backorder penalty costs the supplier incurs holding costs for its inventory and backorder penalty costs for backorders at the retailers the latter cost reflects the supplier s desire to maintain adequate availability of its product to consumers previous research finds the supply chain cost minimizing reorder point policies the cooperative solution the competitive solution is a nash equilibrium a set of reorder points such that no firm can deviate from the equilibrium and lower its cost it is shown that nash equilibria exist and a method is presented to find all of them in some settings the cooperative solution is a nash equilibrium competition does not necessarily lead to supply chain inefficiency in other settings competition leads to costs that are substantially higher than optimal usually but not always the competitive supply chain carries too little inventory three cooperation strategies are discussed change incentives change equilibrium and change control a set of contracts is provided that changes the firms incentives so that the optimal policy is a nash equilibrium an equilibrium change can improve performance but does not guarantee optimal performance to change control the firms let the supplier choose all reorder points a key component in vendor managed inventory that change leads to optimal supply chain performance

trips trade and technology transfer a north south model of unintentional technology transfer is developed where the stringency of southern patent protection provides the institutional backdrop for a strategic game in a high tech goods market the appropriability regime is set endogenously and combines elements of imperfect southern patent protection with the protection afforded by market made northern technology masking less stringent protection of northern intellectual property can work much like other strategic trade policies therefore developed countries appear to be right in demanding discussion of intellectual property rights in gatt

clusters entrepreneurial ecosystem co creation and appropriability a conceptual framework extant literature on clusters underplays the role of entrepreneurs and entrepreneurial management in creating and co creating organizations markets and supporting ecosystems we employ transaction costs resource knowledge capabilities and power control based theories to provide a comparative static governance based perspective on clusters we embed this into a more general co evolutionary entrepreneurial theory of the emergence evolution and co evolution of markets ecosystems and clusters we suggest that clusters can involve advantages that help engender superior appropriation of co created value as compared to alternatives entrepreneurial managers faced with a degree of choice will help co create clusters and be part of them for as long as they can appropriate more value in this way than through alternatives

search and price dispersion in online grocery markets abstract consumers often purchase multiple products at a time from retailers creating multi product incentives for search in this paper we consider how product variety affects consumer search intensity and the dispersion of prices in multi product retail markets we employ online grocery pricing data from four large retailers in the uk to estimate search costs and equilibrium price dispersion for food products under circumstances where i consumers search for single products and ii consumers search for multiple products at once we compare estimates in each case between a model in which utility increases with product variety and a model in which utility is not a function of variety relative to our preferred specification with variety effects in utility we find estimates of both search cost and search frequency to be biased upwards in single product settings when variety effects are ignored however we find estimates of search costs are biased upwards while search frequency is biased downwards in multi product settings when variety effects in utility are ignored

domestic alliance network to attract foreign partners evidence from international joint ventures in china partner selection is a critical issue in building international joint ventures ijvs we argue that foreign firms are more likely to select local firms with unique network structural advantages within a local alliance network we frame structural advantages as two network position traits centrality and brokerage specifically network centrality acts as a stronger network trait than brokerage in attracting foreign ijv partners however such a relationship may be moderated by foreign firms local experience and perceived capabilities we contend that when foreign firms have a high level of local market experience and perceived capabilities they may prefer a local broker over a centrally located local firm data on the domestic alliance network in china s electronics and information technology it industries largely support our hypotheses we conclude that as foreign investors become strategic insiders they may not only seek a local partner s capability attributes but also more critically pay attention to a local partner s domestic network

revenue sharing and vertical control in the video rental industry revenue sharing contracts in which retailers pay a royalty on sales to their suppliers are now widely used in the video rental industry we show that revenue sharing is valuable in vertically separated industries in which demand is either stochastic unpredictable or variable e g systematically declining downstream inventory is chosen before demand is realized and downstream firms engage in intrabrand competition unlike two part tariffs revenue sharing achieves the first best outcome by softening retail price competition without distorting retailers inventory decisions our theories are also consistent with trends in prices and availability following retailers adoption of revenue sharing contracts

a price discrimination theory of coupons the objective of this paper is to analyze the consumer s decision in electing to use cents off coupons distributed by manufacturers of consumer products arguing that the decision to use coupons is based on the tradeoff between costs of using coupons and the savings obtained it is shown that coupons can serve as a price discrimination device to provide a lower price to a particular segment of consumers based on a price theoretic model it is shown that the users of coupons are more price elastic than nonusers of coupons and that the opportunity cost of time and other household resource variables are determinant factors in consumers decisions implications derived from the model are tested using diary panel data

determinants of patent rights a cross national study abstract this paper presents an index of patent rights for 110 countries for the period 1960 1990 the index is used to examine what factors or characteristics of economies determine how strongly patent rights will be protected the evidence does indicate that more developed economies tend to provide stronger protection but the underlying factors which influence patent protection levels are the country s level of research and development r d activity market environment and international integration which are correlated with its level of development the results qualify however that r d activity influences patent protection levels after a nation s research sector reaches a critical size an implication of this is that to raise patent protection levels in weakly protecting countries it is important to foster a significant research base in those countries and thereby create incentives for protecting patent rights

peak load pricing in competitive markets the paper offers an explanation for temporal price dispersion temporal price dispersion in the model is due neither to exogenous shifts in demand nor to price discrimination motives as shown in other papers in this paper the explanation relies on peak load pricing in the model presented consumers decide to purchase a given product in a certain time period according to the satisfaction they derive from the product at that time and to the prices and number of customers they expect at each firm and period the demand in each period is controlled by sellers through prices by offering different prices in different periods sellers motivate consumers to spread themselves across periods in a profitable way therefore the demand and price in each time period is determined endogeneously

a supply chain model with direct and retail channels abstract we study a dual channel supply chain in which a manufacturer sells to a retailer as well as to consumers directly consumers choose the purchase channel based on price and service qualities the manufacturer decides the price of the direct channel and the retailer decides both price and order quantity we develop conditions under which the manufacturer and the retailer share the market in equilibrium we show that the difference in marginal costs of the two channels plays an important role in determining the existence of dual channels in equilibrium we also show that demand variability has a major influence on the equilibrium prices and on the manufacturer s motivation for opening a direct channel in the case that the manufacturer and the retailer coordinate and follow a centralized decision maker we show that adding a direct channel will increase the overall profit our numerical results show that an increase in retailer s service quality may increase the manufacturer s profit in dual channel and a larger range of consumer service sensitivity may benefit both parties in the dual channel our results suggest that the manufacturer is likely to be better off in the dual channel than in the single channel when the retailer s marginal cost is high and the wholesale price consumer valuation and the demand variability are low

exploring the locus of invention the dynamics of network communities and firms invention productivity departing from prior research analyzing the implications of social structure for actors outcomes by applying either an ego network or a global network perspective this study examines the implications of network communities for the invention productivity of firms network communities represent dense and nonoverlapping structural groups of actors in a social system a network community lens helps identify new ways to study firms access to diverse knowledge inputs in a dynamic system of interorganizational relationships specifically we examine how the membership dynamics of a network community affect the invention productivity of member firms by either enabling or constraining access to broad diverse knowledge inputs our findings suggest first that a firm reaps the greatest invention benefits in a network community with moderate levels of membership turnover second a firm attains the greatest invention productivity when its own rate of movement across different network communities is moderate third we find that community members located in the core of their network community can benefit more from membership dynamics and prior community affiliations than those on its periphery in empirical analyses we use the evolving community structure of the network of interorganizational partnerships in the global computer industry over 1981 2001 to predict firms patenting rates

why do hot dogs come in packs of 10 and buns in 8s or 12s a demand side investigation this paper presents a theory that yields insight into the determination of package prices and sizes consumer heterogeneity in consumption rates storage costs and transactions costs costs of making trips to the store explains differences in package sizes and unit prices in the model fully informed consumers and a monopolist seller pursue optimizing behavior the seller chooses package sizes and prices to maximize profits and the consumers select package sizes that maximize their utilities the authors show that consumer heterogeneity may induce the seller to offer more than one size and that larger sizes would be sold either at unit price discounts or unit price premiums welfare implications and empirical tests of the theory are presented copyright 1987 by the university of chicago

trade blocs currency blocs and the reorientation of world trade in the 1930s we analyze the impact of commercial and financial policies on the reorientation of trade in the 1930s we report evidence that commercial policies attenuated prior connections between income growth and trade and that exchange rate instability marginally discouraged international trade in contrast the tendency toward regionalization commonly ascribed to the formation of trade and currency blocs was already evident to a considerable extent prior to the regional policy initiatives of the 1930s this reorientation is more properly attributed to ongoing historical forces such as commercial and financial links between countries forged over many years

price discrimination and social welfare studies the effect of price discrimination on social welfare using methods from duality theory features of the reservation model presented quasi linear utility and consumers surplus upper and lower bounds on welfare change bounds on welfare change with optimal price discrimination from ebsco

competitive and cooperative inventory policies in a two stage supply chain we investigate a two stage serial supply chain with stationary stochastic demand and fixed transportation times inventory holding costs are charged at each stage and each stage may incur a consumer backorder penalty cost e g the upper stage the supplier may dislike backorders at the lower stage the retailer we consider two games in both the stages independently choose base stock policies to minimize their costs the games differ in how the firms track their inventory levels in one the firms are committed to tracking echelon inventory in the other they track local inventory we compare the policies chosen under this competitive regime to those selected to minimize total supply chain costs i e the optimal solution we show that the games nearly always have a unique nash equilibrium and it differs from the optimal solution hence competition reduces efficiency furthermore the two games equilibria are different so the tracking method influences strategic behavior we show that the system optimal solution can be achieved as a nash equilibrium using simple linear transfer payments the value of cooperation is context specific in some settings competition increases total cost by only a fraction of a percent whereas in other settings the cost increase is enormous we also discuss stackelberg equilibria

the impact of patent protection on us pharmaceutical exports to developing countries this article provides evidence that patent protection can have a positive effect on trade by analysing the impact of the implementation of intellectual property rights ipr in developing countries on the us exports of pharmaceutical products following intense lobbying efforts from the us pharmaceutical industry to have the trade related aspects of intellectual property rights trips agreement included in the creation of the world trade organization wto a gravity model using panel data from 1995 to 2010 suggests that the implementation of minimum standards of patent protection has increased us exports of pharmaceuticals to 108 nonadvanced countries

patent rights and trade analysis of biological products medicinals and botanicals and pharmaceuticals this article analyzes the effects of foreign patent rights on u s bilateral exports the empirical analysis covers three highly disaggregated drug industries over three decades we estimate bilateral trade equations for each industry using cross country data on the strength of national patent rights the findings show that strong foreign patent rights enhance the market power of u s drug exporters across countries with weak imitative abilities alternatively strong foreign patent rights stimulate the market expansion of u s drug exports across countries with strong imitative abilities these effects are larger in magnitude during the 1980 90s relative to the 1970s copyright 2002 oxford university press

a strategic analysis of dual channel supply chain design with price and delivery lead time considerations abstract this paper extends the work of chiang et al 2003 by investigating how price and delivery lead time decisions affect channel configuration strategy under either the manufacturer owned or the decentralized mode we show the choice of channel structure depends on customer acceptance of the online channel and the cost parameters following a threshold policy in both forms of ownership we prove that the strategic use of direct marketing to mitigate the double marginalization the major finding in chiang et al 2003 still holds even in this general situation moreover pareto zone exists where both manufacturer and retailer outperform their counterparts in the traditional indirect channel only case thus indicating that mitigating double marginalization may bring mutual benefits we also compare pricing and delivery lead time decisions between different forms of ownership or between different channel structures under the same form of ownership the manufacturer adopts a slow down deliver later approach and speeds up delivery to serve customers with a higher sensitivity to delivery lead time when he owns the whole indirect channel but chooses to stay fast and brag about better services and surprisingly slows down the speed of service when customers are more sensitive to delivery lead time due to the internal competition between two channels in the decentralized mode

new horizons or a strategic mirage artist led distribution versus alliance strategy in the video game industry abstract in this paper we contribute to the debate between researchers who argue that the emergence of online distribution allows content producers in the creative industries to bypass powerful publishers and distributors and other researchers who argue that this strategy cannot succeed without the complementary assets that these intermediaries provide we use a case study of the dutch video game developer dvgd bringing to market an identical game using two different but comparable distribution channels as a quasi experiment in the first release dvgd used online distribution to reach consumers directly whereas in the second it used an alliance with an established video game publisher we find that while the alliance required dvgd to share with the publisher a substantial fraction of the value appropriated by the game the alliance strategy resulted in greater absolute financial performance and relative market performance compared to the self publishing strategy we conclude that the differences in performance can be traced back to specialized complementary assets required for successful commercialization

cross market discounts firms in several markets attract consumers by offering discounts in other unrelated markets this promotion strategy which we call cross market discounts has been successfully adopted in the last few years by many grocery retailers in partnership with gasoline retailers across north america europe and australia in this paper we use an analytical model to investigate the major forces driving the profitability of this novel promotion strategy we consider a generalized scenario in which purchases in a source market lead to price discounts redeemable in a target market our analysis shows that this strategy can be a revenue driver by simultaneously increasing prices as well as sales in the source market even though we assume the demand curve to be downward sloping in price moreover it distributes additional consumption motivated by the discount in two markets and under diminishing marginal returns from consumption this can simultaneously increase firm profits and consumer welfare more effectively than traditional nonlinear pricing strategies our study provides many other interesting insights as well and our key results are in accordance with anecdotal evidence obtained from managers and industry publications

the loss leader is a turkey targeted discounts from multi product competitors abstract i show that multi product firms can compete for their more profitable customers by setting lower margins on goods that are purchased primarily by them effectively offering them discounts without offering these discounts to less profitable customers this suggests a theory of multi product pricing in which a good s profit margin is inversely related to the profitability of the customers who purchase it this theory i provides one explanation for firms offering lower prices to larger customers and ii suggests that loss leader pricing may allow firms to compete more vigorously for more profitable customers this can explain why stores sell turkeys as loss leaders at thanksgiving but may not discount flowers on mother s day or candy on valentines day

international patent protection 1960 2005 abstract this note provides an update to the index of patent protection published in this journal in 1997 the original paper presented the index for 1960 1990 for 110 countries the index has now been updated to 2005 and extended to 122 countries the adoption of stronger patent laws and the composition of patent rights vary across countries by level of economic development

a classification of the literature on the planning of substitutable products abstract a company s assortment of products and corresponding inventory levels are constrained by available resources such as production capacity storage space and capital to acquire the inventory thus customers may not always be able to find a most preferred product at the time of purchase this unsatisfied demand is often substituted with an alternative in the extant literature there have been an increasing number of studies that consider product substitution when planning product assortment inventory and capacity in conjunction with pricing in this paper we classify the literature on the planning of substitutable products published in the major om and marketing journals during the past thirty years 1974 2013 and present a comprehensive taxonomy of the literature one criterion is adopted to discuss modeling objectives and three major criteria are provided to define the nature of product substitution including substitution mechanism substitution decision maker and direction of substitutability we also identify research gaps to provide guidance for related research in the future

product availability in competitive and cooperative dual channel distribution with stock out based substitution abstract this paper investigates the impact of customers stock out based substitution on the product availability and the channel efficiency of a dual channel supply chain which consists of a supplier distributing a single product to customers through both its wholly owned direct channel and an independent retailer the supplier and its retailer with the objective of optimizing their own profit simultaneously choose their own base stock level to satisfy the stochastic demand from the customers whose channel preferences are heterogeneous and may be affected by each channel s product availability the customers dynamically substitute between the two channels in the event of a stock out the result shows that the effect of the stock out based substitution may increase or decrease the efficiency of a decentralized supply chain it is found that while the integrated supplier retailer may consolidate the base stock levels to benefit from stock out based substitution the independent supplier and retailer are more inattentive to customers stock out based substitution thus the competitive base stock levels of the decentralized dual channel supply chain rarely agree with the system optimal levels various contracts are examined to shed light on channel coordination mechanisms in addition it is shown that the channel efficiency of the dual channel distribution can be improved by the emergence of stackelberg leadership from either the supplier or the retailer

embracing digital networks entrepreneurs social capital online abstract this paper presents a research agenda for understanding how entrepreneurs accrue social capital in the digital age we develop a conceptual framework with 12 research propositions that specify how the unique technical capabilities of social network sites impact entrepreneurs bridging and bonding social capital online these propositions are informed by anecdotal evidence from founders that finds entrepreneurs social capital accrual differs online we include theoretical and methodological insights for overcoming research challenges concerning context dynamism intertwined networks and unclear behavioral norms this agenda addresses a growing gap between contemporary entrepreneurial practices and existing social capital theory and research in entrepreneurship

direct marketing indirect profits a strategic analysis of dual channel supply chain design the advent of e commerce has prompted many manufacturers to redesign their traditional channel structures by engaging in direct sales the model conceptualizes the impact of customer acceptance of a direct channel the degree to which customers accept a direct channel as a substitute for shopping at a traditional store on supply chain design the customer acceptance of a direct channel can be strong enough that an indepent manufacturer would open a direct channel to compete with its own retailers here direct marketing is used for strategic channel control purposes even though it is inefficient on its own and surprisingly it can profit the manufacturer even when so direct sales occur specifically we construct a price setting game between a manufacturer and its independent retailer direct marketing which indirectly increases the flow of profits through the retail channel helps the manufacturer improve overall profitability by reducing the degree of inefficient price double marginalization while operated by the manufacturer to constrain the retailer s pricing behavior the direct channel may not always be detrimental to the retailer because it will be accompanied by a wholesale price reduction this combination of manufacturer pull and push can benefit the retailer in equilibrium finally we show that the mere threat of introducing the direct channel can increase the manufacturer s negotiated share of cooperative profits even if price efficiency is obtained by using other business practices

gaining more by stocking less a competitive analysis of product availability the price competition between two firms can affect their decisions about product availability with occasional stockouts a firm loses from foregone sales yet it may indirectly benefit from the higher price a competitor is able to charge the more prone customers are to search elsewhere for the product upon encountering a stockout the greater is the gain from the reduced price competition between firms this paper establishes conditions whereby the strategic interaction of reduced price competition between firms outweighs the loss from foregone sales in such cases a firm can increase its expected profits by choosing to stock less these results provide a competitive rationale for the high stockout levels observed in some retail situations and have implications for the analysis of product availability in public policy settings

the rise and fall of small worlds exploring the dynamics of social structure this paper explores the interplay between social structure and economic action by examining some of the evolutionary dynamics of an emergent network that coalesces into a small world system the study highlights the small world system s evolutionary dynamics at both the macro level of the network and the micro level of an individual actor this dual analytical lens helps establish that in competitive and information intensive settings a small world system could be a highly dynamic structure that follows an inverted u shaped evolutionary pattern wherein an increase in the small worldliness of the system is followed by its later decline as a result of three factors 1 the recursive relationship between the evolving social structure and individual actors formation of bridging ties which eventually homogenizes the information space and decreases actors propensity to form bridging ties creating a globally separated network 2 self containment of the small world network or increasing homogenization of the social system which makes the small world less accepting of and less attractive to new actors thereby limiting formation of bridging ties to outside clusters and 3 fragmentation of the small world network or the small world system s inability to retain current clusters the study uses data on interorganizational tie formation in the global computer industry in the period from 1996 to 2005 to test the hypothesized relationships

accounting profits versus marketing profits a relevant metric for category management retailers have long recognized that some categories are more important than others in consumers store choice decisions the overall profitability of a store requires careful category level merchandising decisions to draw the most desirable consumers into the store however the traditional accounting measure of category profits offers imperfect help making these decisions since it does not take into account the effect of merchandising one category on the profits of other categories in the store a profit measure which takes into account these important cross effects is the most relevant performance metric for category management we call this new construct marketing profits as it focuses on consumers and their store choice behavior and is particularly pertinent to the calculus of marketing decision making despite its practical importance the total impact of merchandising a specific product category on a store s profitability is difficult to measure and in practice managers can only rely on intuitive calibration of marketing profits in making many retailing decisions the difficulty arises from the fact that to directly observe the marketing profits of a category one has to know how consumer store shopping behavior would change and hence what a store s profit would be if the category were to disappear from the consumers store choice decision furthermore it is difficult to devise a demand structure that is rich enough to capture bundled purchases on the part of consumers in a reasonable manner but is simple enough to allow estimation on the basis of commonly observed variables these two technical difficulties explain the conspicuous lack of research that systematically examines how to quantify what we call marketing profits this paper builds a formal model of marketing profits we start by formalizing shopper types and then establish the implied relationship between accounting profits and marketing profits by examining shelf space allocations by a retailer on the consumer side we assume that some consumers pay attention to the assortments offered by different retailers when making their store choice decisions this assumption allows us to establish the demand side linkage between accounting profits and marketing profits consumer store choice decisions put pressure on the retailer to carry wide assortments in categories which are particularly critical to the store choice decisions of the most desirable consumers thus the allocation of shelf space gives rise to the supplyside linkage between accounting profits and marketing profits by examining the outcome of the supermarket s shelf space decision we can merge these two linkages and determine the exact relationship between the accounting and marketing profits central to our theoretical structure is our assumption on retailers shelf space allocation decisions because of the well documented pressure that retailers face in making shelf space allocation decisions we assume that they are acting in a reasonably close to optimal fashion by using either an automated planogram or simply by trial and error optimization requires that returns on shelf space allocated to any category in the store must be identical on the margin and equate to the shadow price of shelf space it is this outcome of shelf space allocation that allows us to uncover the implied relationship between accounting and marketing profits this theoretical structure allows us to construct a measure of marketing profits which can be estimated with data commonly available to retailers we demonstrate this measurement technique by using publicly available data provided by marsh supermarkets and show how marketing profits can improve merchandising decisions in our particular application we find many categories where the marketing profits of a category are very different from the traditional accounting profits further we nd that using this new marketing profits metric to make category level feature advertising space decisions significantly improves the profitability of the retailer the paper concludes by discussing how our measure of marketing profits might be improved by additional research particularly if the researcher has data across many stores

when should a manufacturer set its direct price and wholesale price in dual channel supply chains abstract applying an observable delay game framework developed in noncooperative game theory we investigate the timing problem concerning when a manufacturer managing dual channel supply chains consisting of a retail channel and a direct channel should post its wholesale price and direct price conventionally operational research models describing dual channel supply chains examine price competition where the retailer and the manufacturer simultaneously determine the retail and direct prices respectively in contrast to this conventional setting our model demonstrates that such simultaneous price competition never arises if the manufacturer and retailer can choose not only the level of the price but also the timing of pricing if the manufacturer sets the direct price after setting the wholesale price to the retailer the retailer accelerates the timing of retail pricing prior to the direct price setting by the manufacturer our findings suggest that the manufacturer should post the direct price before or upon but not after setting the wholesale price for the retailer this upfront posting of the direct price not only constitutes the subgame perfect nash equilibrium of the noncooperative game between channel members but also maximizes the profits for a manufacturer employing multichannel sales strategies

profitable pricing when market segments overlap in this paper we analyze profitable pricing strategies when market segments overlap overlapping markets are segments that are not perfectly sealed and leakage between them can occur different consumers are assumed to incur possibly different transaction costs if they choose to purchase in the low price market a monopolist seller knows the distribution of transaction costs across consumers and must choose an optimal pricing strategy in particular the monopolist must decide whether to charge a single price or to price differentiate conditions are derived under which price differentiation will be the most profitable strategy when price differentiation is optimal the equilibrium amount of leakage is determined endogenously unlike the standard economics textbook model of price discrimination in which zero leakage is determined exogenously and is usually given as a necessary condition for price discrimination we show that zero leakage is not necessary for differential pricing to be optimal and that

built to last or meant to end intertemporal choice in strategic alliance portfolios a salient but rarely explicitly studied characteristic of interfirm relationships is that they can intentionally be formed for finite periods of time what determines firms intertemporal choices between different alliance time horizons shadow of the future theorists suggest that when an alliance has an explicitly set short term time frame there is an increased risk that partners may behave opportunistically this does not readily explain the high incidence of time bound alliances being formed reconciling insights from the shadow of the future perspective with nascent research on the flexibility of temporary organizations and shifting the focus from the level of individual transactions to that of strategic alliance portfolios we argue that firms may be willing to accept a higher risk of opportunism when there are offsetting gains in strategic flexibility in managing their strategic alliance portfolio consequently we hypothesize that environmental factors that increase the need for strategic flexibility namely dynamism and complexity in the environment are likely to increase the relative share of time bound alliances in strategic alliance portfolios our analysis of longitudinal data on the intertemporal alliance choices of a large sample of small and medium sized enterprises provides support for this argument our findings fill an important gap in theory about time horizons in interfirm relationships and temporary organizations and show the importance of separating planned terminations from duration based performance measures

founded in adversity operations based survival strategies of ventures founded during a recession abstract we examine the survival of 404 new ventures founded during the 2008 recession we find that industry explains a significant but small percentage of variance in survival 2 81 percent and therefore focus on which operations related actions could enhance ventures odds of survival we find marginally significant support for our hypotheses that a venture founded during a recession is more likely to survive if it increases its production efficiency increases both its production efficiency and variable costs or increases both its production efficiency and fixed costs in property plant and equipment our findings demonstrate that operational decisions are key determinants of survival for ventures founded during a recession

product diversion to a direct competitor a manufacturer will often limit competition among downstream partners by authorizing only a select group of retailers to carry its product however it is not uncommon for authorized retailers to create an additional competitor by diverting units to an unauthorized seller this paper presents an analytical model that demonstrates how diversion from authorized retailers to an unauthorized direct competitor can occur under circumstances not considered by the prior literature in fact diversion can represent a prisoner s dilemma whereby retailers diminish their own profit by selling to the unauthorized direct seller the authorized retailer s profit loss actually increases as the per unit diversion costs incurred by the authorized retailer decrease the model also shows that the unauthorized direct seller earns greater profit by strategically procuring a unilaterally constraining quantity even though this procurement strategy results in an equivalent increase in the quantity sold by the retailers combined the results identify a new reason for diversion and its consequences for retailers and the unauthorized direct seller

yes bait and switch really benefits consumers in our 1990 marketing science paper we demonstrated that a law prohibiting bait and switch may have the surprising consequence of hurting the consumers it was designed to protect wilkie mela and gundlach 1998 postulate that this may be false if up selling is equally effective when the bait brand is available and when it is out of stock we show here that our earlier conclusion is correct in a more general setting a law prohibiting bait and switch in a competitive market can reduce consumer well being but never improve it when bait and switch occurs it creates welfare gains and when it would create welfare losses it does not occur regardless of a law prohibiting the practice

multiproduct pricing in oligopoly abstract this paper proposes a two good model of price competition where some consumers visit all shops and others visit only one we find that information frictions lead to price dispersion when the two goods are complements their prices will tend to be negatively correlated so if one is priced high the other will be discounted this finding is supported by some empirical evidence which suggests that simultaneous price discounts of complements are infrequent if the goods are substitutes their prices will be uncorrelated potentially rationalizing the lack of evidence on their co pricing when selling complements retailers earn higher profits than in the one good model through taxing captive consumers with a high overall price tag and attracting shoppers by pricing one of the goods aggressively bundling practices are thus shown to be detrimental to retailers profits

the timing of sales this paper presents a model of intertemporal price discrimination a fixed number of sellers produce a homogeneous good consumers with different preferences enter the market in each period and leave when they make a purchase the sellers typically vary their prices over time charging a high price in most periods but occasionally cutting the price to sell to a large group of customers with a low reservation price in some equilibria all stores lower their price at the same time and to the same level

can more consumers lead to lower profits a model of multi product competition abstract the article analyzes the optimal pricing strategy of duopoly retailers who sell two goods to three consumer segments two segments that are interested in one good and one that wants to buy both goods the analysis suggests that the markup on one of the goods might be negative and that the existence of consumers who buy both goods can either increase or decrease markups surprisingly the addition of the consumers who buy both goods unchanging the number of the other consumers might decrease profits and increasing the number of consumers who buy one good might also reduce profits this suggests that firms should consider carefully how additional customers might affect the competitive environment and the equilibrium before attempting to attract them to the market

loss leader pricing and rain check policy loss leader pricing and rain check policies are common in retail markets yet research on these topics is surprisingly scarce in this paper we study the effects of leader pricing and rain check policy on stores profits and market outcomes suppose stores can accurately predict demand might they still run out of stock we investigate whether such a result is plausible when stores can offer rain checks the paper also helps resolve an issue that has recently attracted much attention should the ftc repeal its rule prohibiting stock outs of advertised sale items

strategic introduction of the marketplace channel under spillovers from online to offline sales abstract in recent years the increasing prevalence of online retailing has given rise to a novel e channel the marketplace in which manufacturers sell their products directly to consumers by paying fees to e tailers this e channel unlike the conventional reseller e channel endows manufacturers with absolute control over prices which helps protect brick and mortar channels especially in the presence of different types of spillovers from online to offline sales however the marketplace channel is nevertheless not used in practice in some instances as a result of the e tailer s costly platform fees and the manufacturer s inefficiency in direct retail sales these different attitudes raise key questions of whether and under what conditions the marketplace channel should be introduced in addition to the reseller channel in this paper we study these problems by measuring the combined effects of the online spillover the platform fee and the manufacturer s retailing inefficiency we demonstrate that the manufacturer s willingness to employ the marketplace channel increases and the e tailer s willingness to do so decreases in the level of spillovers when combining the two we find that a pareto improvement can be achieved under a moderate spillover we also present an interesting insight that the introduction of the marketplace channel fundamentally changes the effects of the spillover on the e tailer while merely strengthening those on the manufacturer moreover a higher platform fee does not necessarily incentivize the e tailer to join the marketplace and the manufacturer s retailing inefficiency may either benefit or harm the e tailer depending on the size of the platform fee

inventory competition under dynamic consumer choice we analyze a model of inventory competition among n firms that provide competing substitutable goods each firm chooses initial inventory levels for their good in a single period newsboy like inventory model customers choose dynamically based on current availability so the inventory levels at one firm affect the demand of all competingfirms this creates a strategic interaction amongthe firms inventory decisions our work extends earlier work on variations of this problem by karjalainen 1992 lippman and mccardle 1997 and parlar 1988 specifically we model demand in a more realistic way as a stochastic sequence of heterogeneous consumers who choose dynamically from amongthe available goods or choose not to purchase based on a utility maximization criterion we also use a sample path analysis so minimal assumptions are imposed on this demand process we characterize the nash equilibrium of the resulting stocking game and prove it is unique in the symmetric case we show there is a bias toward overstocking caused by competition specifically reducing the quantity stocked at any equilibrium of the game increases total system profits and at any joint optimal set of stocking levels each firm has an individual incentive to increase its own stock for the symmetric case we show that as the number of competing firms increases the overstockingbecomes so severe that total system and individual firm profits approach zero finally we propose a stochastic gradient algorithm for computing equilibria and provide several numerical examples

how trade related are intellectual property rights abstract there is little empirical evidence about whether differing international levels of patent protection influence trade flows if a nation strengthens its patent laws it could experience higher or lower imports we specify an empirical model in which deviations of bilateral sectoral imports from anticipated levels are related to income trade barriers and patent laws patent regulations in the importing country are corrected for endogeneity through the use of instrumental variables the results of the final equations indicate that increasing patent protection has a positive impact on bilateral manufacturing imports into both small and large developing economies

the impact of patent rights on international trade evidence from canada the extent to which canadian manufacturing exports are sensitive to national differences in patent rights are examined the conclusion is that overall canadians tend to export more to those countries where their patent rights are highly safeguarded stronger patent protection induces canadians to export relatively more to high income countries than to low income countries in addition the effect of stronger patent rights is to increase exports to those countries that pose a strong threat of imitation and to reduce exports to those countries that pose the weakest threat of imitation jel classification f13 o34 impact de la propriete des brevets sur le commerce international resultats pour le canada ce memoire examine jusqu a quel point les exportations manufacturieres canadiennes sont sensibles aux differences dans la propriete des brevets entre pays l etude conclut que les canadiens tendent a exporter davantage vers les pays ou la propriete des brevets est hautement protegee il appert que la plus forte protection de la propriete des brevets tend a faire que les canadiens exportent relativement plus vers les pays a hauts revenus que vers ceux a plus faibles revenus de plus il appert que l effet de la plus forte protection des brevets est d accroitre les exportations vers les pays qui posent une forte menace d imitation et de reduire les exportations vers les pays qui posent la plus faible menace d imitation

demand forecast sharing in a dual channel supply chain abstract we assess the benefits of sharing demand forecast information in a manufacturer retailer supply chain consisting of a traditional retail channel and a direct channel the demand is a linear function of price with a gaussian primary demand i e zero price market potential both the manufacturer and the retailer set their price based on their forecast of the primary demand in this setting we investigate the value of sharing demand forecasts we analyze the make to order scenario in which prices are set before and production takes place after the primary demand is known and the make to stock scenario in which production takes place and prices are set before the primary demand is known we also compare the supply chain performance with and without the direct channel under some assumptions production cost is zero and each demand function has the same slope of price we find that the direct channel has a negative impact on the retailer s performance and under some conditions the manufacturer and the whole supply chain are better off our research extends and complements prior research that has investigated only the inventory and replenishment related benefits of information sharing

do stronger patent rights raise high tech exports to the developing world abstract despite over 20 years of debate the trips agreement remains very contentious this paper evaluates the impact of strengthening patent rights prs in developing countries on developed countries exports over the 1962 2000 period colonial origin is used to isolate exogenous variation in prs the impact is then identified by examining the cross industry difference in sensitivity to prs i find that the increase in prs made in response to the trips agreement added about 35 billion 2000 us dollars to the value of developed countries patent sensitive exports into 18 developing countries this amount is equivalent to an 8 6 increase in these developing countries annual value of patent sensitive imports the increase in the value of exports was driven by a quantity rather than a price increase

intellectual property rights multinational firms and economic growth abstract this paper develops a model of north south trade with multinational firms and economic growth in order to analyze formally the effects of stronger intellectual property rights ipr protection in developing countries in the model northern firms invent new higher quality products multinational firms transfer manufacturing operations to the south and the southern firms imitate products produced by multinational firms it is shown that stronger ipr protection in the south i e the adoption and implementation of the trips agreement leads to a permanent increase in the rate of technology transfer to the south within multinational firms a permanent increase in r d employment by southern affiliates of northern multinationals a permanent decrease in the north south wage gap and a temporary increase in the northern innovation rate

risky business the survival implications of exploiting commercial opportunities by nonprofits prior research is equivocal as to the performance implications of exploiting market based opportunities by nonprofit organizations we investigate an under addressed measure of performance in this literature organizational survival drawing upon resource dependence theory we argue that performance is largely dependent upon the extent to which nonprofits focus on market based opportunities through analysis of the population of canadian charities we find support for a u shaped relationship indicating that low to moderate levels of market based income decrease the likelihood of firm exit whereas high levels increase this likelihood

how do foreign patent rights affect u s exports affiliate sales and licenses abstract this paper analyzes how foreign patent rights fprs affect us exports affiliate sales and licenses our approach is distinctive in three ways we apply ownership location and internalization concepts to link fprs with servicing decisions we account for the simultaneity of servicing decisions we estimate the relative effects of fprs on exports affiliate sales and licenses empirical findings show strong fprs increase us affiliate sales and licenses particularly across countries with strong imitative abilities further fprs have a larger effect on us knowledge transferred outside the country and firm relative to knowledge located inside the country and internalized inside the firm

a model of add on pricing this paper examines competitive price discrimination with horizontal and vertical taste differences consumers with higher valuations for quality are assumed to have stronger brand preferences two models are considered a standard competitive price discrimination model in which consumers observe all prices and an add on pricing game in which add on prices are naturally unobserved and firms may advertise a base good at a low price in hopes of selling add ons at high unadvertised prices in the standard game price discrimination is self reinforcing the model sometimes has both equilibria in which the firms practice price discrimination and equilibria in which they do not the analysis of the add on pricing game focuses on the chicago school argument that profits earned on add ons will be competed away via lower prices for advertised goods a conclusion is that add on practices can raise equilibrium profits by creating an adverse selection problem that makes price cutting unappealing although profitable when jointly adopted using add on pricing is not individually rational in a simple extension with endogenous advertising practices and costless advertising several models that could account for add on pricing are discussed

theoretical models of sales promotions contributions limitations and a future research agenda our objective in this paper is to review theoretical models of sales promotions we highlight the key contributions of these models discuss their limitations and outline an agenda for future research managerial questions examined in these models include some very fundamental issues such as why firms resort to the use of sales promotions in mature markets and why the use of sales promotions has increased dramatically during the last two decades also included in this review are models that address firm level strategic issues such as the allocation of dollars between advertising and sales promotions and the relative emphasis on trade promotions vis a vis consumer promotions we also review theoretical models that explain how consumers respond to price promotions and what type of sales promotion tools may be superior to others in a particular market the review concludes with a possible agenda for future research

dealing temporary price cuts by seller as a buyer discrimination mechanism this paper is concerned with temporary price cuts deals sales and specials as a mechanism for the seller to price discriminate between buyers with different intensities of demand we analyze why a seller offers such price cuts which buyers take advantage of them and what the parameters are that determine the amount and frequency of the discount offered in the remainder of this section we briefly review the literature on price deals 1 in section ii simple models of buyer and seller behavior are developed and we show why and how a seller adopts a dealing strategy section iii summarizes the key implications of the model and indicates how the price discrimination hypothesis could be tested in practice section iv suggests possible extensions of the model finally section v gives our conclusions in the marketing literature the issue of who is deal prone has been extensively researched an explanation for temporary price cuts usually called deals sales or specials is provided we hypothesize that they are a mechanism that discriminates between more intense and less intense demanders we further hypothesize a positive relationship between demand elasticity and holding costs buyers with more intense demand with high holding costs are those who will be buying the product at its regular price the low holdingcost buyers take advantage of deals by forward buying the model is applicable to three relationships 1 manufacturer reseller where the reseller may be a wholesaler or a retailer 2 resellerreseller for example wholesaler retailer and 3 retailer consumer we are grateful to michael mussa and albert madansky for their comments we also benefited from comments made by the marketing faculty of the wharton school at a seminar where an earlier version of this paper was presented neil beckwith in particular is acknowledged 1 for a more detailed review of deals and similar pricecutting mechanisms e g mail in rebates cents off labels coupons etc see narsimhan 1982 chan 2 journal of business 1985 vol 58 no 3 1985 by the university of chicago all rights reserved 0021 9398185 5803 0004 01 50

how do social defenses work a resource dependence lens on technology ventures venture capital investors and corporate relationships interorganizational relationships offer many potential benefits but they also expose firms to dangers such as misappropriation which pull partners apart this tension between collaboration and competition is central to tie formation especially for young technology firms that have both a high need for resources and high appropriability of their own resources prior work has examined legal and timing defenses that enable interorganizational ties by such low power firms we focus here on social defenses in a longitudinal study of equity tie formation between young firms and established corporate sharks spanning five technology based industries and 25 years we unpack the effects of social defenses and find intriguingly that centrally positioned third parties are a particularly powerful social defense and that third party social defenses are especially significant when more traditional defenses are unavailable we thus offer the insight that third party chaperones central venture capital investors play a key role in helping young firms to mitigate and navigate vulnerabilities while mobilizing resources

pricing policies under direct vs indirect channel competition and national vs store brand competition abstract this paper analyzes channel pricing in multiple distribution channels under competition between a national brand nb and a store brand sb where an nb can be distributed both through a direct channel e channel and an indirect channel local stores but an sb can be distributed only through an indirect channel we first explore cross brand and cross channel pricing policies formulating the problem as a nash pricing game we reach two findings 1 brand loyalty building is profitable for both an nb and an sb and 2 marketing decisions are more restrictive for an nb channel than they are for the sb channel we next assess supply chain coordination and reach two findings 1 wholesale price change does not coordinate the supply chain and 2 an appropriate combination of markup and markdown prices can achieve both supply chain coordination and a win win outcome for each channel

optimal quality and quantity provisions for centralized vs decentralized distribution market size uncertainty effects abstract we provide insights on how market size uncertainty affects the optimal quality quantity provision in distribution channels when consumers are heterogeneous in their willingness to pay for product quality in this context we denote the difference between the manufacturer s optimal quality quantity provision for a centralized channel and its optimal analog for a decentralized channel as the quality quantity differential we find that market size uncertainty creates or increases the quantity differential but it does not affect the differential s polarity in contrast market size uncertainty decreases the quality differential and it does so to the extent that depending on the level of consumer heterogeneity it reverses the differential s polarity moreover we find that the higher the inherent uncertainty level the more pronounced are the effects we likewise find that the effects of market size uncertainty are amplified if the notion of consumer heterogeneity is replaced with retail level competition

monopolist pricing with dynamic demand and production cost this paper deals with pricing of a new product over time by a monopolist who maximizes the discounted profit stream the interdependency of cost and demand on cumulative production makes the problem inherently dynamic cost is assumed to be declining with cumulative production learning curve effect while demand is a function of price and cumulative sales representing word of mouth and saturation effects the paper addresses this problem in a general framework that includes several previous results as special cases and provides new insights in other situations while the learning curve and word of mouth effect cause prices to be lower than the price that maximizes immediate revenues the saturation factor has the opposite effect the price path over time is affected by these factors and the interest rate we characterize the price path under several different situations and interpret the results for policy guidelines