competition and cooperation in decentralized push and pull assembly systems in this paper we study a decentralized assembly system consisting of a single assembler who buys complementary components from independent suppliers under two contracting schemes push and pull in both schemes the component suppliers are allowed to freely form coalitions or alliances among themselves to better coordinate their pricing or production decisions we show that the sole driver of the inefficiency in a push system which is due to horizontal decentralization of suppliers is the number of alliances that were formed specifically it is shown that in a push system the assembler s profit the total profit of all suppliers and the consumers surplus are all decreasing in the number of coalitions and are thus maximized when the grand coalition is formed we further carry out a stability analysis of coalition structures to verify to what extent suppliers can reduce or eliminate the inefficiency due to their decentralization by forming alliances we show that in a push system with more than two

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

impact of pension system structure on international financial capital allocation abstract recent findings indicate that pension system structure affects private savings and through them the aggregate foreign asset position of a country we present a two country overlapping generations model that explores the relationship between the magnitude of pension guarantees and the resulting portfolio choices of workers the existence of a pay as you go pension system lowers the wealth of the young workers who consequently borrow from abroad to supplement their current consumption and lowers the overall riskiness of their lifetime wealth prompting them to invest in risky equity financed by the selling of safe bonds in particular we are able to replicate and explain the venture capitalist positive net equity accompanied by negative net debt portfolio profile of the united states more broadly we find empirical support for our results in a cross country analysis using data from 110 economies greater amounts of pension spending are associated with international indebtedness long equity positions and short debt positions

capacity allocation ordering and pricing decisions in a supply chain with demand and supply uncertainties abstract this paper studies coordinated decisions in a decentralized supply chain that consists of one original equipment manufacturer oem one manufacturer and one distributor and possesses uncertainties at both demand and supply sides these uncertainties emerge respectively from random demand the distributor faces and randomness of capacity with which the oem processes the manufacturer s outsourced quantity sharing supply and demand uncertainty information along the supply chain enables us to develop three models with different coordination efforts the oem and manufacturer coordination the manufacturer and distributor coordination and the oem manufacturer and distributor coordination and quantify the coordinated decisions in these three models our analysis of these coordination models suggests that coordinating with the oem improves the manufacturer s probability of meeting downstream demand and his expected profit yet coordinating with the manufacturer is not necessarily beneficial to the oem when downstream coordination is lacking

horizontal carrier coordination through cooperative governance structures this paper examines how governance structures found in the trucking industry impact the coordination between a forwarder and its carriers including three cases no forwarder coordination direct contracting with shippers investor owned coordination price only contract and carrier cooperative coordination revenue sharing contract the carriers are engaged in a cournot competition where they decide upon service provision and truck investment economic theory predicts that integration of firms under oligopolistic competition always leads to a more efficient supply chain in the sense that prices decrease and quantities increase which reduces total profits this suggests that the benefit of avoiding double marginalization does not outweigh the benefit of upstream competition in the successive oligopoly case whereas both integrated and independent firms coexist the integrated chains do perform better in this paper we examine the interaction between governance structures a key decision when managing supply chains including that found in the trucking industry and shippers willingness to procure trucking services instead of producing them using a private fleet we find that cooperative governance can contribute to improved service provision reduced service price improved consumer surplus and improved profit for the carriers in equilibrium we use parameter values based on the swedish trucking industry and a larger grocery retailer acting as shipper to numerically illustrate the impact of different governance structures

research note quantity discounts in differentiated consumer product markets in this paper we extend the standard hotelling model of product differentiation to incorporate a second dimension of consumer heterogeneity that relates to the quantity of the product consumers wish to buy this extension allows us to derive optimal nonlinear pricing rules chosen by competing sellers when offering differentiated products in the marketplace it also permits us to assess whether sellers find it optimal to offer quantity discounts in such a setting and the implications of such discounts on their profitability we find that offering quantity discounts corresponds indeed to equilibrium behavior the extent of discounting declines the less differentiated the products surprisingly when sellers offer to consumers a choice between two different sized packages their profits are at most as high as when such a choice is unavailable moreover when utilizing nonlinear pricing rules is not feasible the profits of the sellers actually decline when they offer consumers a choice between different sized packages a limited empirical investigation supports the comparative statics we derive in our theoretical model

a decision theoretic model of public opinion guns butter and european common defense why do individuals support the public policies they do we argue that individuals can have quite sophisticated policy preferences and that not correctly modeling those preferences can lead to critically misspecified empirical models to substantiate this position we derive and test a decision theoretic model that relies upon three critical assumptions 1 policies affect the provision of multiple goods about which individuals care 2 individuals have diminishing returns to scale in those goods and 3 preferences over at least some subset of those goods are correlated using this model we demonstrate that arbitrarily small secondary policy effects can confound predictions over primary policy effects thus not considering even arbitrarily small policy effects can cause one to conclude that evidence is consistent with one s theory when in fact it is inconsistent or vice versa testing this theory on support for forming a european common defense we find evidence consistent with our model

implicit understandings in channels of distribution formal agreements can be used to achieve coordination among channel members these agreements work by exerting explicit control over the members who make the agreements however implicit understandings can be used as a partial substitute for more formal agreements in this paper we show that implicit understandings can develop as channel members learn about each other s behavior we show that this learning leads to the use of the implicit influence each channel member has over the other s behavior the learning leading to an implicit understanding requires some form of experimentation or historical observation this learning results in an oscillating retail price when only one channel member learns the other s behavior both channel members obtain greater profits than when neither member learns and both channel members obtain less profits than when both members learn however the member who does not learn obtains more profits than the member who learns we also show that implicit understandings r

outsourcing retail pricing to a category captain the role of information firewalls it has been argued that retailers lack both the resources and capabilities to maximize category performance retailers may seek category management cm advice from a manufacturer referred to as a category captain cc a cc s recommendations affect all brands in the category not just her own despite an increase in the number of cc collaborations retailers are still concerned about manufacturer opportunism and militant behavior by manufacturers not selected as ccs whereas government agencies are worried about anticompetitive behavior that could harm consumers the federal trade commission recommends strictly enforced information firewalls within a cc s organization as a best practice guideline in this study we develop an empirical model and use policy simulations to quantify the impact of cc arrangements with information firewalls on retailers manufacturers and consumers we show how these effects could be influenced by the deactivation of vertical and horizontal information firewalls within the cc s organization

a time series analysis of representative agent models of consumption andleisure choice under uncertainty this paper investigates empirically a model of aggregate consumption and leisure decisions in which utility from goods and leisure is nontime separable the nonseparability of preferences accommodates intertemporal substitution or complementarity of leisure and thereby affects the comovements in aggregate compensation and hours worked these cross relations are examined empirically using postwar monthly u s data on quantities real wages and the real return on the one month treasury bill the estimated values of the parameters governing preferences differ significantly from the values assumed in several studies of real business models several possible explanations of these discrepancies are discussed

flexible and risk sharing supply contracts under price uncertainty we study supply contracts for deterministic demand but in an environment of uncertain prices we develop valuation methodologies for different types of supply contracts a time inflexible contract requires the firm to specify not only how many units it will purchase but also the timing of the purchase a time flexible contract allows the firm to specify the purchase amount over a given period of time without specifying the exact time of purchase other than time flexibility the suppliers may offer quantity flexibility to the firm as well i e purchase quantities could be within a prespecified quantity window finally risk sharing features can be incorporated in the contract in terms of the purchase price that the firm eventually pays to a supplier within a prespecified price window the firm pays the realized price but outside of it the firm shares in an agreed way added costs or benefits given the structure of a supply contract we study the firm s decision when to purchase and how many units in each purchase such that the expected net present value of the purchase cost plus inventory holding cost is minimized we discuss optimal purchasing strategies for both time flexible and time inflexible contracts with risk sharing features other interesting results include the analysis of two supplier sourcing environments and the exploitation of quantity flexibility in such contracts our discussion illustrates how time flexibility quantity flexibility supplier selection and risk sharing when carefully exercised can effectively reduce the sourcing cost in environments of price uncertainty

interest rates and currency prices in a two country world abstract this paper is a theoretical study of the determination of prices interest rates and currency exchange rates set in an infinitely lived two country world which is subject both to stochastic endowment shocks and to monetary instability formulas are obtained for pricing all equity claims nominally denominated bonds and currencies and these formulas are related to earlier closely related results in the theories of money finance international trade

farsighted coalitional stability abstract i define the largest consistent set a solution concept which applies to situations in which coalitions freely form but cannot make binding contracts act publicly and are fully farsighted in that a coalition considers the possibility that once it acts another coalition might react a third coalition might in turn react and so on without limit i establish weak nonemptiness conditions and apply it to strategic and coalitional form games and majority rule voting i argue that it improves on the von neumann morgenstern stable set as it is usually defined but is consistent with a generalization of the stable set as in the theory of social situations journal of economic literature classification numbers c70 c71

commodity trade and international risk sharing how much do financial markets matter abstract this paper evaluates the social gains from international risk sharing in some simple general equilibrium models with output uncertainty a simulation model calibrated to selected moments of u s and japanese data estimates the incremental loss from a ban on international portfolio diversification to be on the order of 0 20 percent of output per year even the theoretical gains from asset trade may disappear under alternative sets of assumptions on preferences and technology the paper argues that the small magnitude of potential trade gains may help explain the apparently inconsistent findings of empirical studies on the degree of international capital mobility

the marketing channel as an equilibrium set of contracts nash bargaining theory and recent developments in economic contract theory are employed in the analysis of the marketing channels individual dyadic contracts involving payment schedules between members of a simple 3 level channel are investigated with particular reference to monitoring problems and intrachannel power relations the interrelations between individual contracts are examined and the equilibrium set of contracts constituting the channel derived the performance of the channel in terms of risk sharing allocative efficiency and the distribution of gains is then evaluated it is found that the risk aversion of channel members and the cost of monitoring and enforcement affect channel efficiency and that under certain types of interdependencies and externalities the nature of the power structure is crucial to channel efficiency

pricing and rebate policies in the two echelon supply chain with asymmetric information under price dependent stochastic demand abstract this paper analyzes the manufacturers strategy of optimizing the direct rebate to the final customer and the wholesale price to a profit maximizing retailer with a price dependent stochastic demand the manufacturer possesses full information about the cost and the functional relationship among demand price and rebate but may or may not know about the nature of the underlying demand uncertainty faced by the retailer the conditions under which a retailer benefits from passing on such information are identified the main features of the model are illustrated analytically and numerically using linear or iso elastic demand functions with additive or multiplicative error structures several important implications have been derived especially those dealing with price and rebate pass throughs and with the cost to the manufacturer of asymmetric information

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

nonlinear pricing in markets with interdependent demand this paper provides a mathematical framework for modeling demand and determining optimal price schedules in markets which have demand externalities and can sustain nonlinear pricing these fundamental economic concepts appear in the marketplace in the form of mutual buyers benefits and quantity discounts the theory addressing these aspects is relevant to a wide variety of goods and services examples include tariffs for electronic communications services pricing of franchises and royalty fees for copyrighted material and patents this paper builds on several previous results from microeconomics and extends nonlinear pricing to markets with demand externalities the implications of this price structure are compared to results obtained for flat rates and two part tariffs in a similar context a case study is described in which the results were applied to planning the startup of a new electronic communications service

costs and benefits of inducing intrabrand competition the role of limited liability when is inducing intrabrand competition via nonexclusive distribution an optimal strategy to address this issue a static model is developed to examine two settings the manufacturer uses exclusive distributors in the first setting and nonexclusive distributors in the second the analysis indicates that the choice of distribution rests critically on whether the manufacturer can effectively extract surplus from the distributors due to a variety of institutional reasons the distributors liability is often limited in performing on behalf of the manufacturer such limited liability restricts how much of the distributors surplus can be extracted when the distributors surplus cannot be fully extracted the manufacturer may prefer nonexclusive distribution even when distributors can free ride on each other s efforts

discounting the free ride alliances and security in the postwar world the collective goods theory of alliances and neorealist theory yield conflicting expectations about the security policies of states the former emphasizes the temptation to ride free on the efforts of others while the latter emphasizes the incentives for self help in the cases of britain china and france during the early cold war the constraints identified by neorealist theory reinforced by the advent of nuclear weapons prevailed each discounted the value of the security benefits superpower partners could provide the second ranking powers decisions to shoulder the burden of developing independent nuclear forces are at odds with collective goods arguments that portray especially strong temptations to ride free in the circumstances that prevailed at that time an international system dominated by two superpowers each possessing large nuclear deterrent arsenals that could easily be employed on behalf of allies this analysis suggests that present efforts to discourage additional states from acquiring nuclear weapons by offering them international security guarantees are unlikely to succeed

an approach for developing an optimal discount pricing policy this paper addresses the problem of why and how a seller should develop a discount pricing structure even if such a pricing structure does not alter ultimate demand the situation modeled is most appropriate where the seller s product does not represent a major component of the buyer s final product where the demand for the product is derived or where the price is only one of many factors considered in making a purchase decision a model of buyer reaction to any given pricing scheme is developed to show that there exists a unified pricing policy which motivates the buyer to increase its ordering quantity per order thereby reducing the joint buyer and seller ordering and holding costs as a result the seller is able to reduce its costs while leaving the buyer no worse off and often better off the model is extended to handle variable ordering and shipping costs and situations where the seller faces numerous groups of buyers each having different ordering policies finally a case study is presented explicitly showing how the proposed pricing policy can be applied to the situation of a large seller selling to a number of different buyer groups

competitor orientation and the evolution of business markets competitor orientation i e the focus on beating the competition rather than maximizing profits seems to thrive in business situations despite being by definition suboptimal for profit maximizing firms our research explains how a competitor orientation can persist and even thrive in equilibrium in markets that reward only profits we apply evolutionary game theory to business markets where reputation matters we use three games that represent classic interactions in business marketing chicken to illustrate competition for product adoption the battle of the sexes channel negotiations and the prisoners dilemma pricing battles initial populations are assumed to have both profit maximizing managers and competitor oriented managers i e those who gain additional utility from beating others we demonstrate that a competitor orientation can survive in equilibrium despite selection that is based solely on profits using chicken we show that a competitor orientation thrives and can even overrun the population we use the battle of the sexes to show that a competitor orientation will overrun one population in a two sided negotiation e g all retailers in a retailer manufacturer dyad last using the prisoners dilemma we show that competitor orientation is not selected against we conclude that evolutionary profit driven selection pressures cannot be assumed to eliminate nonprofit maximizing behavior even when selection is based purely on profitability

coordinating investment production and subcontracting we value the option of subcontracting to improve financial performance and system coordination by analyzing a competitive stochastic investment game with recourse the manufacturer and subcontractor decide separately on their capacity investment levels then demand uncertainty is resolved and both parties have the option to subcontract when deciding on their production and sales we analyze and present outsourcing conditions for three contract types 1 price only contracts where an ex ante transfer price is set for each unit supplied by the subcontractor 2 incomplete contracts where both parties negotiate over the subcontracting transfer and 3 state dependent price only and incomplete contracts for which we show an equivalence result while subcontracting with these three contract types can coordinate production decisions in the supply system only state dependent contracts can eliminate all decentralization costs and coordinate capacity investment decisions the minimally sufficient price only contract that coordinates our supply chain specifies transfer prices for a small number 6 in our model of contingent scenarios our game theoretic model allows the analysis of the role of transfer prices and of the bargaining power of buyer and supplier we find that sometimes firms may be better off leaving some contract parameters unspecified ex ante and agreeing to negotiate ex post also a price focused strategy for managing subcontractors can backfire because a lower transfer price may decrease the manufacturer s profit finally as with financial options the option value of subcontracting increases as markets are more volatile or more negatively correlated

cheap talk and bogus network externalities in the emerging technology market many emerging technologies exhibit path dependent demands driven by positive network feedback such network effects profoundly impact marketing strategists thinking in today s network economy however the significant network externalities expected by many people often fail to materialize in the emerging technology market we analyze this phenomenon in the context of a technology distribution channel by studying cheap talk strategies under information asymmetry we show that incentive compatible contracts are essential for achieving credible information transmission in our model the better informed technology vendor has an incentive to inflate the retailer s ex ante belief of network externalities when a wholesale price contract is adopted when properly termed revenue sharing contracts are implemented there are information efficient cheap talk equilibria where truthful information transmission is mutually beneficial when the vendor s information is imperfect even revenue sharing contracts cannot guarantee credible information transmission if there is significant prior belief disparity between the vendor and the retailer this study demonstrates how information inefficient equilibria e g information blockage arise because of the conflict of interest or the conflict of opinion among channel members it also explores the role of cheap talk in facilitating channel coordination

using game theory to model competition the article is an exposition of the basic concepts of noncooperative game theory and their application to advertising product and price competition

advertising in a distribution channel conventional wisdom suggests that one of the goals of manufacturer advertising is to reduce the cross price elasticity between products make one s own and rivals products appear to be less substitutable in the eyes of consumers conventional wisdom also suggests that all else being equal retailers will be able to obtain better terms of trade from manufacturers the more substitutable are the manufacturers products it follows that retailers should be opposed to advertising that has the effect of reducing cross price elasticities and thus that manufacturer advertising can be a source of channel conflict we show that these conventional wisdoms need not hold when only some consumers are exposed to the advertising messages using a hotelling model of demand we show that 1 manufacturers can be worse off from advertising that reduces the cross price elasticities between their products 2 channel conflict need not arise even when the sole purpose of advertising is to affect cross price elasticities and 3 depending on its bargaining power a retailer can be better off when the manufacturers products are perceived to be less substitutable

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

chain gangs and passed bucks predicting alliance patterns in multipolarity contemporary balance of power theory has become too parsimonious to yield determinate predictions about state alliance strategies in multipolarity kenneth waltz s theory predicts only that multipolarity predisposes states to either of two opposite errors which this article characterizes as chain ganging and buck passing to predict which of these two policies will prevail it is necessary to complicate waltz s theory by adding a variable from robert jervis s theory of the security dilemma the variable of whether offense or defense is perceived to have the advantage at least under the checkerboard geographical conditions in europe before world wars i and ii perceived offensive advantage bred unconditional alliances whereas perceived defensive advantage bred free riding on the balancing efforts of others

a note on price discount based on early order commitment in a single manufacturer multiple retailer supply chain abstract early order commitment eoc is a strategy for supply chain coordination wherein the retailer commits to purchasing from a manufacturer a fixed order quantity a few periods in advance of the regular delivery lead time in this paper we formulate and analyze the eoc strategy for a decentralized two level supply chain consisting of a single manufacturer and multiple retailers who face external demands that follow an autocorrelated ar 1 process over time we characterize the special structure of the optimal solutions for the retailers eoc periods to minimize the total supply chain cost and discuss the impact of demand parameters and cost parameters we then develop and compare three solution approaches to solving the optimal solution using this optimal cost as the benchmark we investigate the effectiveness of using the wholesale price discount scheme for the manufacturer to coordinate this decentralized system we give numerical examples to show the benefits of eoc to the whole supply chain examine the efficiency of the discount scheme in general situation and provide the special conditions when the full coordination is achieved

an investigation of the equal commission rate policy for a multi product salesforce for a multi product sales force the policy of paying commissions as an equal percentage of realized gross margins is shown to be in general nonoptimal from the firm s profit maximization point of view for a homogeneous salesforce the nonoptimality results from the fact that earlier research while taking into account the effect of commission rates on a salesperson s allocations of total time to the multiple products has not incorporated the effect of commission rates on salesperson s total selling time resulting from his her trading off income vs total time to maximize utility the equal commission rate policy is however optimal for the cases of i salesperson with a fixed total selling time and a minimum income requirement and ii fair income salesperson whose total selling time is merely a function of income and not based on rate of change of income as in the utility maximization case if the salesforce is heterogeneous e g different salespersons have differing sales responses to selling time this makes the equal commission rate policy to be in general nonoptimal even for the restrictive cases i and ii it is suggested that the commission rates be set higher for products with greater elasticities relating quantities sold to selling times the common practice of paying commissions as a percentage of total dollar sales rather than gross margins is shown to be optimal under certain assumptions

large scale service marketplaces the role of the moderating firm recently large scale web based service marketplaces where many small service providers compete among themselves in catering to customers with diverse needs have emerged customers who frequent these marketplaces seek quick resolutions and thus are usually willing to trade prices with waiting times the main goal of this paper is to discuss the role of the moderating firm in facilitating information gathering operational efficiency and communication among agents in service marketplaces surprisingly we show that operational efficiency may be detrimental to the overall efficiency of the marketplace furthermore we establish that to reap the expected gains of operational efficiency the moderating firm may need to complement the operational efficiency by enabling communication among its agents the study emphasizes the scale of such marketplaces and the impact it has on the outcomes this paper was accepted by yossi aviv operations management

rational conjectures in the theory of oligopoly abstract the paper employs the notion of rational conjectural equilibrium to remove the arbitrary nature of conjectures about rivals reactions which characterises the traditional non cooperative theory of oligopoly a general definition of these equilibria is given and the concept is then applied to a simple duopoly model the standard models of perfect competition monopoly limit price dominant firms are shown to emerge as special cases of rational conjectural equilibria

international risk sharing in overlapping generations models abstract we propose a way to address the backus smith puzzle that instead of relying on extreme parameter values or complex modeling assumptions simply switches the framework from infinitely lived agents to overlapping generations young agents face nondiversifiable wage risk that leads to a low degree of risk sharing within each country subsequently international price movements are not sufficient to achieve the high consumption real exchange rate correlation produced in standard infinitely lived agent dsge models

firm strategies in the mid tail of platform based retailing while millions of products are sold on its retail platform amazon com itself stocks and sells only a very small fraction of them most of these products are sold by third party sellers who pay amazon a fee for each unit sold empirical evidence clearly suggests that amazon tends to sell high demand products and leave long tail products for independent sellers to offer we investigate how a platform owner such as amazon facing ex ante demand uncertainty may strategically learn from these sellers early sales which of the mid tail products are worthwhile for its direct selling and which are best left for others to sell the platform owner s cherry picking of the successful products however gives an independent seller the incentive to mask any high demand by lowering his sales with a reduced service level unobserved by the platform owner we analyze this strategic interaction between a platform owner and an independent seller using a game theoretic model with two types of sellers one with high demand and one with low demand we show that it may not always be optimal for the platform owner to identify the seller s demand interestingly the platform owner may be worse off by retaining its option to sell the independent seller s product whereas both types of sellers may benefit from the platform owner s threat of entry the platform owner s entry option may reduce consumer surplus in the early period although it increases consumer surplus in the later period we also investigate how consumer reviews influence the market outcome

decentralized inventory control in a two component assembly system abstract we investigate a two component assembly system facing stationary stochastic demand with constant component replenishment lead times holding cost are charged for each component inventory which are managed by component suppliers final product demand is backordered when cannot be fulfilled in time and a penalty cost is charged we assume the long lead time component supplier takes normal base stock policy while the short lead time component supplier takes a modified base stock policy static game and stackelberg games are considered equilibria are analyzed and the cost in equilibria are compared with the system optimal solution difference shows the deterioration of system performance caused by decentralized inventory control we try to design a mechanism to coordinate the decentralized system that is to make decentralized system perform as well as system optimal solution though the decisions separated we show that a liner transfer based on the backorder between the component suppliers qualifies this task

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

consumption and real exchange rates in dynamic economies with non traded goods abstract we examine the possibility that non traded goods may account for several striking features of international macroeconomic data large persistent deviations from purchasing power parity small correlations of aggregate consumption fluctuations across countries and substantial international real interest rate differentials a dynamic exchange economy is used to show that non traded goods in principle can account for each of these phenomena in the theory there is a close relation between fluctuations in consumption ratios and those in bilateral real exchange rates but we find little evidence for this relation in time series data for eight oecd countries

note channel of distribution profits when channel members form conjectures it is well known that lower channel profits are achieved in the bilateral manufacturer reseller monopoly if manufacturer and reseller independently optimize their respective profits they take each other s decisions as given i e adopt decision rules that ignore their influence on the other channel member higher profits are achieved if they coordinate their profit maximizing decisions consequently there is an economic justification for 1 vertical integration that by definition prevents conflicting profit objectives or 2 contracts that change channel members incentives to the compatible objectives of shares of total channel profits this paper investigates the possibility that coordination might take place without formal arrangements like vertical integration or contracts the reason for this contention is the casual observation that channel members are often acutely aware of the interdependencies between channel participants we might thus expect that they will form conjectures about other channel members reactions to their own actions we show that rational conjectures lead profit maximizing channel members to adopt modified decisions rules can such conjectural decision making create at least partially channel coordination or cooperation in other words can channel members deviate from the nash equilibrium and thus achieve greater profits the answer given in this paper is a conditional yes

the salesperson as outside agent or employee a transaction cost analysis this descriptive study explores the reasons for integration of the personal selling function i e the use of employee direct salespeople rather than manufacturers representatives reps a hypothesized model is developed based on both transaction cost analysis and the sales force management literature data from 13 electronic component manufacturers covering 159 u s sales districts are used to estimate a logistic model of the probability of going direct in a given district results are shown to be stable across specification and estimation methods and to fit the data well the transaction cost model is generally supported the principal finding is that the greater the difficulty of evaluating a salesperson s performance the more likely the firm to substitute surveillance for commission as a control mechanism i e to use a direct sales force among other findings direct sales forces are also associated with complex hard to learn product lines and with districts that demand considerable nonselling activities several factors prove unrelated including company size the amount of travel a district requires and the importance of key accounts this article was originally published in marketing science volume 4 issue 3 pages 234 254 in 1985

an industry equilibrium analysis of downstream vertical integration this paper investigates the effect of product substitutability on nash equilibrium distribution structures in a duopoly where each manufacturer distributes its goods through a single exclusive retailer which may be either a franchised outlet or a factory store static linear demand and cost functions are assumed and a number of rules about players expectations of competitors behavior are examined it is found that for most specifications product substitutability does influence the equilibrium distribution structure for low degrees of substitutability each manufacturer will distribute its product through a company store for more highly competitive goods manufacturers will be more likely to use a decentralized distribution system this article was originally published in marketing science volume 2 issue 2 pages 161 191 in 1983

risk information and incentives in telecom supply chains supply chain management involves the selection coordination and motivation of independently operated suppliers the central planner s perspective in operations management translates poorly to vertically separated chains where suppliers recurrently seem to object to benevolent information sharing and centralized decision rights seen from the supplier s perspective such resistance may very well be rational a downstream assembly line disclosing reliable information on actual and forecasted sales puts itself at a disadvantage when bargaining on share of chain profits in this paper we use a minimal agency model to contrast known optimal mechanisms with the actual practice in the telecommunications industry a three stage supply chain under stochastic demand and varying coordination and information asymmetry is modeled a two period investment production game addresses the information sharing and specific investment problem in the telecom industry the observed price quantity contracts under limited commitment are shown to be inadequate under realistic asymmetric information assumptions more a result of gradually evolving changes in bargaining power than coordination efforts the upstream urge to coordinate may further deteriorate performance in terms of our model c 2003 elsevier science b v all rights reserved

modeling the psychology of consumer and firm behavior with behavioral economics abstract marketing is an applied science that tries to explain and influence how firms and consumers behave in markets marketing models are usually applications of standard economic theories which rely on strong assumptions of rationality of consumers and firms behavioral economics explores the implications of the limits of rationality with the goal of making economic theories more plausible by explaining and predicting behavior more accurately while maintaining formal power this article reviews six behavioral economics models that are useful to marketing three models generalize standard preference structures to allow for sensitivity to reference points and loss aversion social preferences toward outcomes of others and preference for instant gratification the other three models generalize the concept of game theoretic equilibrium allowing decision makers to make mistakes encounter limits on the depth of strategic thinking and equilibrate by learning from feedback the authors also discuss a sp

pricing and volume discounting for a dominant retailer with uncertain manufacturing cost information abstract a product costs the manufacturer c unit to produce the retailer sells it at p unit to the consumers the retail market demand volume v varies with p according to a given demand curve d p how would or should the players i e the manufacturer and the retailer set their prices in contrast to many studies that assume a dominant manufacturer implementing the manufacturer stackelberg ms game this paper examines how a dominant retailer should operate when his knowledge of c is imperfect we first derive optimal decisions some of them counter intuitive for the dominant retailer when he is restricted to choosing between rs retailer stackelberg and ms second we propose a reverse quantity discount scheme that the dominant retailer i e the downstream player can offer to the manufacturer note that the standard discount scheme is offered by the upstream player we show that this discounting scheme is quite effective compared to the considerably more complicated though nevertheless theoretically optimal menu of contracts we also reveal a largely overlooked function of discounting i e discounting enables an ignorant but dominant player to usurp the earnings attributable to the knowledge of the dominated player finally we also show that discounting works well when the demand curve is linear but becomes ineffective when the demand curve is iso elastic a result echoing the conclusions of some earlier related works

uncertainty asymmetric information and bilateral contracts on considere un monopole bilateral avec incertitude et information asymetrique on donne les conditions necessaires et suffisantes a l existence de contrats qui soient efficaces et a la fois stimulants

stable farsighted coalitions in competitive markets in this paper we study dynamic alliance formation among agents in competitive markets we look at n agents selling substitutable products competing in a market in this setting we examine models with deterministic and stochastic demand and we use a two stage approach in stage 1 agents form alliances coalitions and in stage 2 coalitions make decisions price and inventory and compete against one another to analyze the stability of coalition structures in stage 1 we use two notions from cooperative games the largest consistent set lcs and the equilibrium process of coalition formation epcf which allow players to be farsighted thus in forming alliances players consider two key phenomena first players trade off the size of the total profit of the system versus their allocation of this total pie and second they weigh the possibility that an immediate beneficial defection can trigger further counter defections that in the end may prove to be worse than the status quo in particular one such example is that of the grand coalition which we show to be stable in the farsighted sense even though players benefit myopically by defecting from it we also provide conditions under which a situation of a few lone players competing against a large coalition is stable we examine the impact of the size of the market n the degree of competition the effect of cost parameters and the variability of the demand process on the prices inventory levels and structure of the market we discuss the possible strategic implications of our results to firms in a competitive market and for new entrants

a comparison of different quantity discount pricing policies in a two echelon channel with stochastic and asymmetric demand information abstract in this paper we study quantity discount pricing policies in a channel of one manufacturer and one retailer the paper assumes that the channel faces a stochastic price sensitive demand but the retailer can privately observe the realization of an uncertain demand parameter the problem is analyzed as a stackelberg game in which the manufacturer declares quantity discount pricing schemes to the retailer and then the retailer follows by selecting the retail price and associated quantity proposed in the paper are four quantity discount pricing policies regular quantity discount fixed percentage discount incremental volume discount and fixed marginal profit rate discount optimal solutions are derived and numerical examples are presented to illustrate the efficiency of each discount policy

vertical strategic interaction implications for channel pricing strategy this paper examines two strategic pricing decisions within channels using foresight i e price leadership and considering category implications i e product line pricing are price leadership and product line pricing always the best pricing strategies for a channel member if not when does this occur and why by investigating these questions we address some major concerns of both marketing practitioners and scholars interested in channel management issues in addition this study provides an indepth discussion on why previous analytic studies produced answers to these questions that depend upon the choice of the form of demand functions as such this study should significantly resolve the debate among analytic marketing modelers about the right demand specification at the core of our discussion lies the concept of vertical strategic interaction which is defined in terms of the direction of a channel member s reaction to the actions of its channel partner within a given demand structure specifically if a channel member s best reaction is to reduce its margin when its channel partner increases its margin the type of vertical strategic interaction is referred to as vertical strategic substitutability vss if the best reaction is to increase the margin the environment is referred to as vertical strategic complementarity vsc if the best reaction is no margin change it is referred to as vertical strategic independence vsi using a game theoretic approach we demonstrate that these three types of vertical strategic interactions represent a key driving force for optimal decisions on channel price leadership and product line pricing our investigation involves mathematical analyses of an industry model composed of two manufacturers selling competing products both carried by two competing retailers as such the model allows for retailer product line pricing as well as manufacturer and retailer level competition in addition this general model can be used to analyze three more restrictive industry settings often found in the channels literature i e a bilateral monopoly jeuland and shugan jeuland abel steven m shugan 1983 managing channel profits marketing sci 2summer 239 72 two competing manufacturers selling through competing franchised retailers mcguire and staelin mcguire timothy w richard staelin 1983 an industry equilibrium analysis of downstream vertical integration marketing sci 2spring 161 92 and two competing manufacturers selling through one common retailer using product line pricing choi choi s chan 1991 price competition in a channel structure with a common retailer marketing sci 10fall 271 96 unlike many other channel studies most of our analyses are performed without assuming particular functional forms of demand curves thus this paper provides greater assurance that the insights from this stream of research are broadly applicable not only across industry structures but also across demand conditions the paper starts out by defining three different rules for how prices are set the manufacturer uses foresight the retailer uses foresight and neither channel member uses foresight we then show a one to one mapping between the type of vertical strategic interaction and the optimality of channel price leadership specifically a channel member finds it profitable to be a price leader for vss but prefers to be a follower for vsc for vsi channel members are indifferent to the channel price leadership issue as it has no effect on channel member profits we also show that there exist conditions under which a retailer might see a reduction in profits when it changes its policy from non product line pricing to product line pricing such conditions arise when the retailer is not a price leader and the environment is characterized by vss or vsc at a more general level this study suggests not only the value but also the cost to a firm for using superior knowledge i e foresight and or product line pricing in making strategic marketing decisions in this way ignorance can be bliss we also explore the link between demand characteristics and the three types of vertical strategic interaction we show that the type of vertical strategic interaction present in a given environment is closely related with the convexity of the demand curve and the level of demand for a given price interestingly we find that linearity of demand is not a necessary condition for any of the three types of vertical strategic demand function consequently in evaluating the robustness of analytic analyses it may be more important to determine the type of vertical strategic interaction assumed instead of whether the demand is linear or nonlinear finally our results are limited to situations where the channels are not coordinated and the retailer s precommitment to particular pricing policy and decision is credible although such situations still capture a significant portion of reality we acknowledge that the insights from this study might not be applicable in all situations

on manufacturing marketing incentives stereotypically marketing is mainly concerned about satisfying customers and manufacturing is mainly interested in factory efficiency using the principal agent agency paradigm which assumes that the marketing and manufacturing managers of the firm will act in their self interest we seek incentive plans that will induce those managers to act so that the owner of the firm can attain as much as possible of the residual returns one optimal incentive plan can be interpreted as follows the owner subcontracts to pay the manufacturing manager a fixed rate for all capacity he delivers each marketing manager receives all of the returns from his product in turn all managers pay a fixed fee to the owner under this plan the marketing managers will often complain about the stock level decisions even though these levels are announced in advance under a revised plan the owner can eliminate such complaints by delegating the stocking decisions to the respective marketing managers without any loss this plan is interpreted as requiring the owner to make a futures market for manufacturing capacity paying the manufacturing manager the expected marginal value for each unit of capacity delivered receiving the realized marginal value from the marketing managers and losing money on average in the process

trade elasticity of substitution and equilibrium dynamics abstract the empirical literature provides a wide range of estimates for trade elasticities at the aggregate level recent contributions in international macroeconomics suggest that low implied values of the trade elasticity may play an important role in understanding the disconnect between international prices and real variables however a standard model of the international business cycle displays multiple locally isolated equilibria if the trade is sufficiently low the main contribution of this paper is to compute and characterize some dynamic properties of these equilibria in simulations the presence of multiple equilibria is shown to imply a volatile and persistent real exchange rate

formation of alliances in internet based supply exchanges in different industries such as automobiles chemicals or retailing competitors are joining forces in establishing electronic marketplaces to reduce inefficiencies in the purchasing process and cut costs by combining their buying power joining such an alliance leads to reduced costs including those of possible rivals because members share the development and operating costs a company that joins an alliance agrees to share its suppliers with others which may lead to more intense competition among the increased number of suppliers and it may further benefit an alliance member at the expense of companies left outside the alliance natural questions that could arise then are when would a firm prefer to take part in an electronic marketplace joint venture when would it prefer that other firms possibly rivals join the venture and what are the financial consequences of either joining an alliance or remaining independent in an attempt to gain a better understanding of the issues we have developed a model of three retailers whose products may have a certain degree of substitutability we provide some conditions in terms of product substitutability and compatibility of retailers that would lead to the formation of a three member alliance or a two member alliance or no alliance at all we also study the effect of alliance structure and compatibility of retailers on the profit of a company

vertical integration with endogenous contract leadership stability and fair profit allocation abstract this paper studies vertical integration in serial supply chains with a wholesale price contract we consider a business environment where the contracting leader may be endogenously changed before and after forming the integration a cooperative game is formulated to normatively analyze the stable and fair profit allocations under the grand coalition in such an environment our main result demonstrates that vertical integration is stable when all members are pessimistic in the sense that they are sure that they will not become the contracting leader if they deviate from the grand coalition we find that in this case the grand coalition s profit must be allocated more to the retailer and the members with higher costs nevertheless we also show the conditions under which the upstream manufacturer can have strong power as in traditional supply chains

comment managing channel profits comment in a recent paper in this journal jeuland and shugan jeuland a s shugan 1983 managing channel profits marketing sci 2 summer 239 272 proposed a quantity discount schedule as a way of coordinating a channel as they put it on p 253 of their paper a quantity discount schedule which would fix the retailer s and hence the manufacturer s profits to some fixed linear function of total channel profits would lead the channel to maximize profits the purpose of this note is to show that a quantity discount schedule is not necessary for channel coordination

on supply chain coordination for false failure returns a quantity discount contract approach abstract a large proportion of consumer returns fall into the category of false failure returns which refer to returns without functional defects in this paper we consider profits resulting from exerting costly effort to reduce false failure returns in a reverse supply chain the supply chain as a whole has a strong incentive to reduce such returns for cost saving however retailers typically enjoy a full credit provided by suppliers for returns so they may not have sufficient incentives to exert enough effort for supply chain profit maximization in some scenarios retailers may even have the motivation to encourage such returns we suggest using a coordination contract to resolve this profit conflict we introduce a quantity discount contract which specifies a payment to the retailer with an amount exponentially decreasing in the number of returns we present explicit forms of such contracts given different assumptions about the distribution of the number of returns we also prove that the contract is pareto improving besides it is shown that when the contract is applied in a closed loop supply chain it can deter retailer s potential incentive to encourage returns moreover some modifications of the contract can lead to easy allocation of supply chain profit

analysis of a two stage telecommunication supply chain with technology dependent demand we analyze a two stage telecommunication supply chain consisting of one operator and one vendor under a multiple period setting the operator faces a stochastic market demand which depends on technology investment level the decision variables for the operator are the initial technology investment level and the capacity of the network for each period the capacity that the operator installs in one period also remains available in subsequent periods the operator can increase or decrease the available capacity at each period for this model an algorithm to find the centralized optimal solution is proposed a profit sharing contract where firms share both the revenue and operating costs generated throughout the periods along with initial technology investment is suggested also a coordinating quantity discount contract where the discount on the price depends on the total installed capacity is designed the case where the vendor decides on the technology investment level and the operator decides on the capacity of the network is also analyzed and it is shown that this game has a unique nash equilibrium

the hunt vitell general theoryof marketing ethics can it enhance our understanding of principal agent relationships in channels of distribution this paper advances the hunt vitell general theory of marketing ethics as a framework for enriching current understanding of both long term marketing relationships in general and principal agent associations specifically under economic models of agency theory manufacturer distributor relationships are conceptualized as principal agent associations where both parties are assumed be motivated exclusively by short term financial self interest within the logical constraints of zero sum game conditions as a general model of ethical decision making and behavior in marketing the hunt vitell theory illustrates how ethical decisions are predicated not only upon estimations of potential benefits or outcomes using teleological criteria but also deontological evaluations which invoke norms and values furthermore the recent ideas advanced in relationship marketing perspectives suggest that distribution channel associations premised upon non zero sum or symbiotic assumptions may be more effective and more jointly profitable based upon the hunt vitell model propositions are formulated that complement the understanding of agency theory within the context of marketing channel relationships and thus may represent a basis for more effective agency selection and interaction in marketing practice

coordinated decisions for substitutable products in a common retailer supply chain abstract this paper studies coordination mechanisms in a supply chain which consists of two suppliers with capacity uncertainties selling differential yet substitutable products through a common retailer who faces price sensitive random demand of these two products we develop in a noncompetitive setting three coordination models revenue sharing return policy and combination of revenue sharing and return policy and contrast them with a basic and uncoordinated model we are able to establish the ordinal relationship among the retailer s ordering and pricing decisions and analytically compare the performances between certain models when two suppliers are identical we find that the retailer s ordering and pricing decisions in the model with return policy in the case of identical suppliers are independent of demand or supply uncertainty our numerical results reveal that the performances of coordination models in the case of nonidentical suppliers resemble those in the case of identical suppliers we find that the retailer will place a larger order quantity in models where her average cost per unit sold is smaller we also find that product substitutability and uncertainties have different effects on chain performances

on the international transmission of technology shocks abstract using vector autoregressions on u s time series and an aggregate of industrialized countries we find that technology shocks appreciate the terms of trade and lower the trade balance they induce an s shaped cross correlation function for both variables the s curve in calibrating a prototypical international business cycle model under complete and incomplete financial markets we find two distinct sets of parameter values while both model specifications deliver the s curve the underlying transmission mechanism of technology shocks is fundamentally different most importantly only in the incomplete markets economy the terms of trade appreciate and thus amplify the relative wealth effects of technology shocks as suggested by the evidence

the formation of cooperatives a game theoretic approach with implications for cooperative finance decision making and stability this paper departs from the traditional organization oriented approach to cooperative analysis it exploits cooperation s functional similarity to vertical integration to examine individuals incentives to form cooperatives a model of formation of a purchasing cooperative is presented and developed as an n person game with the core as a solution concept core existence is examined for both single and multiple cooperative configurations and cooperative finance methods are examined relative to finding core compatible allocation rules the results provide insight into a cooperative s equilibrium output stability decision making financing methods and choice of open or restricted membership

distribution channels an extension of exclusive retailership the underlying channel structure in most studies to date has consisted either of exclusive dealers that sell only one manufacturer s brand or of a single retailer selling multiple brands little attention has been given to the larger segment of most consumer goods markets in which retailers compete to sell multiple brands at the same location this research seeks to add to the growing literature of channel competition by analyzing three channel structures the least constrained of which deals with two competing manufacturers and two retailers each of whom distributes both products in a noncooperative game with two nash s and one stackleberg equilibrium using differentiated products and a linear demand function we introduce the concept of store substitutability a measure corresponding to product substitutability representing competitiveness at the retail level between the two retailers we are able to obtain closed form solutions for all cases we show that the presence of competitive effects at both retail and manufacturer levels of distribution has a significant impact on profits and prices we also study the effects of various power relationships in the channel furthermore we compare these results to those obtained by previous research finally we propose some testable implications and suggest avenues for future research

europeans and the european community the dynamics of public support for european integration europeans evaluate the european community ec according to its economic performance political salience and role in international relations during the last two decades their measured attitudes toward european integration warmed especially when inflation rates fell as the ec share of the country s trade expanded when ec elections and referenda increased attention to the community and to some extend during periods when east west relations were relaxed europeans did not vary their support according to their countries shares of the brussels budget thus notwithstanding denmark s 1992 rejection of the maastricht treaty and the end of the cold war recent ec reforms that increase monetary stability intra european trade and political attention are all likely to maintain or increase citizen support for the ec these findings result from a model that blends comparative political economy with international relations in one of the first applications of pooled cross sectional and time series analysis to the comparative study of public opinion

introduction of a second channel implications for pricing and profits in this paper we study the optimal pricing strategies when a product is sold on two channels such as the internet and a traditional channel we assume a stylized deterministic demand model where the demand on a channel depends on prices degree of substitution across channels and the overall market potential we first study four prevalent pricing strategies which differ in the degree of autonomy for the internet channel for a monopoly we provide theoretical bounds for these pricing strategies we also analyze the duopoly case where an incumbent mixed retailer faces competition with a pure retailer and characterize price equilibria finally through a computational study we explore the behavior price and profits under different parameters and consumer preferences for the alternative channels

inventory games with permissible delay in payments abstract meca et al 2004 studied a class of inventory games which arise when a group of retailers who observe demand for a common item decide to cooperate and make joint orders with the eoq policy in this paper we extend their model to the situation where retailer s delay in payments is permitted by the supplier we introduce the corresponding inventory game with permissible delay in payments and prove that its core is nonempty then a core allocation rule is proposed which can be reached through population monotonic allocation scheme under this allocation rule the grand coalition is shown to be stable from a farsighted point of view

a stackelberg model of pricing of complementary goods under information asymmetry abstract we consider a duopoly market where two separate firms offer complementary goods in a leader follower type move each firm has private forecast information about the uncertain market demand and decides whether to share it with the other firm we show that information sharing would benefit the leader firm but hurt the follower firm as well as the total system if the follower firm shares information unconditionally we then devise a simple to implement information sharing scheme under which both firms and the total system are better off we also provide several interesting managerial insights and establish the robustness of the model in managing a supply chain through our analytical and simulation results

the quantity flexibility contract and supplier customer incentives consider a supply chain consisting of two independent agents a supplier e g a manufacturer and its customer e g a retailer the latter in turn serving an uncertain market demand to reconcile manufacturing procurement time lags with a need for timely response to the market such supply chains often must commit resources to production quantities based on forecasted rather than realized demand the customer typically provides a planning forecast of its intended purchase which does not entail commitment benefiting from overproduction while not bearing the immediate costs the customer has incentive to initially overforecast before eventually purchasing a lesser quantity the supplier must in turn anticipate such behavior in its production quantity decision this individually rational behavior results in an inefficient supply chain this paper models the incentives of the two parties identifying causes of inefficiency and suggesting remedies particular attention is given to the quantity flexibility qf contract which couples the customer s commitment to purchase no less than a certain percentage below the forecast with the supplier s guarantee to deliver up to a certain percentage above under certain conditions this method can allocate the costs of market demand uncertainty so as to lead the individually motivated supplier and customer to the systemwide optimal outcome we characterize the implications of qf contracts for the behavior and performance of both parties and the supply chain as a whole

competition and structure in serial supply chains with deterministic demand supply chains often consist of several tiers with different numbers of firms competing at each tier a major determinant of the structure of supply chains is the cost structure associated with the underlying manufacturing process in this paper we examine the impact of fixed and variable costs on the structure and competitiveness of supply chains with a serial structure and price sensitive linear deterministic demand the entry stage is modeled as a simultaneous game where the players take the outcomes of the subsequent post entry cournot competition into account in making their entry decisions we derive expressions for prices and production quantities as functions of the number of entrants at each tier of a multitier chain we characterize viability and stability of supply chain structures and show using lattice arguments that there is always an equilibrium structure in pure strategies in the entry game finally we examine the effects of vertical integration in the two tier case altogether the paper provides a framework for comparing a variety of supply chain structures and for studying how they are affected by cost structures and by the number of entrants throughout the chain

unfair allocation of gains under the equal price allocation method in purchasing groups certain purchasing groups do not flourish a supposed reason for this is a creeping dissatisfaction among various members of a group with the allocation of the cooperative gains in this paper we analyze unfairness resulting from using the commonly used equal price ep method for allocating gains under the assumption of continuous quantity discounts we demonstrate that this unfairness is caused by neglecting a particular component of the added value of individual group members next we develop two fairness ratios and tie these to fairness properties from cooperative game theory the ratios show among other things that being too big a player in a purchasing group can lead to decreasing gains they can be used to assess if ep is an unfair method in specific situations finally we discuss measures a purchasing group could consider in order to attenuate perceived unfairness thereby the group may improve its stability and prosperity

risk sharing and group decision making in a decision making problem where a group will receive an uncertain payoff which must be divided among the members of the group the ultimate payoff of interest is the vector of individual payoffs received by the members of the group in this paper preferences are quantified in terms of cardinal utility functions for such vectors of payoffs these utility functions can represent preferences concerning equitable and inequitable vectors of payoffs as well as attitudes toward risk the individual utility functions are aggregated to form a group utility function for the vector of payoffs and this latter function is in turn used to generate a group utility function for the overall group payoff and a sharing rule for dividing the group payoff into individual payoffs the resulting group decisions are pareto optimal in utility space properties of the sharing rule and the group utility function are investigated for additive and multilinear group utility functions

transshipment of inventories among retailers myopic vs farsighted stability the author considers a model of a decentralized distribution system consisting of n retailers selling an identical product retailers face a stochastic demand and must order their initial inventory before this demand is realized after demand realization retailers decide how much of their unsold inventory or unsatisfied demand they want to share with other retailers this is followed by a transshipment of leftover inventories and distribution of the additional profit generated through inventory sharing the author addresses the following issue suppose that the retailers distribute the profit from inventory sharing according to an allocation rule that induces retailers to share their residuals in a way that maximizes the additional profit such as the shapley value but may not belong to the core is it likely that in this framework all retailers will jointly share their residuals and not form subcoalitions previous research has looked at this problem from a myopic viewpoint and concluded that the grand coalition is not stable unlike the prior work the author looks at stability in a farsighted sense that is retailers do not consider only their immediate payoffs but are also concerned with reactions of other retailers to their actions in a symmetric setting with identical additional unit revenues from transshipments generated by all retailers farsighted retailers always maximize their allocations by not defecting from the grand coalition the author also provides conditions when the same is true for nonidentical additional unit revenues

manufacturer s revenue sharing contract and retail competition this paper investigates a revenue sharing contract for coordinating a supply chain comprising one manufacturer and two competing retailers the manufacturer as a stackelberg leader offers a revenue sharing contract to two competing retailers who face stochastic demand before the selling season under the offered contract terms the competing retailers are to determine the quantities to be ordered from the manufacturer prior to the season and the retail price at which to sell the items during the season the process of pricing and ordering is expected to result in an equilibrium as in the bayesian nash game on the basis of anticipated responses and actions of the retailers the manufacturer designs the revenue sharing contract adopting the classic newsvendor problem model framework and using numerical methods the study finds that the provision of revenue sharing in the contract can obtain better performance than a price only contract however the benefits earned under the revenue sharing contract by different supply chain partners differ because of the impact of demand variability and price sensitivity factors the paper also analyses the impact of demand variability on decisions about optimal retail price order quantity and profit sharing between the manufacturer and the retailers lastly it investigates how the competition between retailers factor influences the decision making of supply chain members in response to uncertain demand and profit variability

channel coordination and quantity discounts this paper presents a model for analyzing the impact of joint decision policies on channel coordination in a system consisting of a supplier and a group of homogeneous buyers the joint decision policy characterized by the unit selling price and the order quantity is coordinated through quantity discounts and franchise fees both the annual demand rate and the operating cost including the purchase ordering and inventory holding costs depend on the joint decision policy employed this paper contributes by integrating work addressing quantity discounts on inventory and ordering policies and work focusing on the control mechanism provided by quantity discounts in channel coordination it is shown that the optimal all unit quantity discount policy is equivalent to the optimal incremental quantity discount policy in achieving channel coordination furthermore it is shown that quantity discounts alone are not sufficient to guarantee joint profit maximization the analyses of the general models are illustrated by specific analytical results obtained for a given demand function