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

household contributions to community development in indonesia summary critical to the success of community development is the degree to which citizens contribute their resources the paper develops regression models to examine the effects of household and community characteristics on household contributions of time and money to three types of participatory community development efforts governance social welfare and environmental infrastructure households with indicators of lower socio economic status generally contributed less time and money to community development integration into social networks was also a strong predictor of the amount of time a household contributed because most of the community development efforts analyzed rely on reciprocity where participants contribute resources in order to receive benefits the findings raise doubts about the extent to which these efforts help the poor and socially excluded

strategy and control in supplier distributor relationships an agency perspective this paper examines the influence of competitive strategy on the relationship between suppliers and their distribution networks drawing on agency theory hypotheses are developed specifying the appropriate match between manufacturer strategies and systems of control within distribution channels cluster analysis is used to show distinct differences in channel management and structure for the three generic strategies of cost leadership differentiation and focus results suggest that variation in control relationships may be explained by the demands posed by manufacturers competitive strategies this study therefore extends the applicability of porter s typology to the specific structure of distribution channels and shows that agency theory can provide insights into the economic basis of interorganizational relationships

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

multistage capital budgeting with delayed consumption of slack capital budgeting frequently involves multiple stages at which firms can continue or abandon ongoing projects in this paper we study a project requiring two stages of investment failure to fund stage 1 of the investment precludes investment in stage 2 whereas failure to fund stage 2 results in early termination in contrast to the existing literature we assume that the firm can limit the manager s informational rents with the early termination of the project in this setting we find that the firm optimally commits to a capital allocation scheme whereby it forgoes positive net present value npv projects at stage 1 capital rationing whereas at stage 2 depending on the manager s previous report it sometimes implements projects with a negative continuation npv but in other situations forgoes implementing projects with positive continuation npvs this paper was accepted by mary barth accounting

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

multi period contracts between principal and agent with adverse selection abstract multi period contracts with adverse selection at the time of contracting are studied with risk neutrality and independent private information all inefficiency arises in the first period only with positive serial correlation inefficiency is more pervasive but declines over time

contract based motivation for keeping records of a manager s reporting and budgeting history this paper analyzes the role of the agent s bankruptcy constraints in multiperiod principal agent models with asymmetric information conditions are provided under which commitment to a long term contract involving n rounds of investment improves upon repetition of n identical single period contracts further when the agent s reservation wage is sufficiently low the optimal contract is always long term keeping records of a manager s history of reporting activity facilitates contracting since optimal contracts may require a link between past reports and future investments over a duration of two or more periods

the determination of performance standards and participation the purpose of this paper is to study the usefulness of performance standards it is often recommended that subordinates should participate in determining their own standards of performance the main reason being of a behavioral nature i shall demonstrate that there is also an economic rationale for this participation when the participation is used to convey information from a better informed subordinate to a lessinformed manager given that this information will be used for the subordinate s performance evaluation the subordinate has an obvious incentive to cheat in this reporting i construct an agency model which includes these reporting incentive problems and use it to study the effects of participation on the agency and the value of information systems to the agency throughout the analysis the agent will be kept at a constant level of utility so that the principal s utility becomes a measure of the agency s preferences thus reflecting pareto optimality the methodology in this paper is closely related to that of demski and feltham 1978 magee 1980 and baiman and demski 1980 magee 1980 in particular studied issues related to participation but he did not confine his study to pareto optimal contracts as will be the case in this paper in order to maintain a tractable problem many behavioral factors will be left outside the formal analysis despite the fact these have played a major role in the behavioral literature on participation cf argyris 1952 becker and green 1962 stedry 1960 and swieringa and moncur 1975

optimal multiperiod contracts and the gain from enduring relationships under private information informational asymmetries can play a key role in explaining the existence and nature of multiperiod contracts in an illustrative risk sharing model even relatively short two period contracts can be mutually beneficial if there is private information though one period contracts suffice otherwise further contracts which are pareto optimal relative to the environment and the information structure are defined and partially characterized an example illustrates how otherwise inefficient intertemporal tie ins can be used optimally to mitigate incentive problems the obvious borrowing lending schemes are not private information pareto optimal in these period by period actions are not sufficiently constrained discounting affects the form of the optimal contract but none of these qualitative conclusions

capitals and capabilities a framework for analyzing peasant viability rural livelihoods and poverty abstract on the basis of themes emerging in current debates on rural development in latin america this paper develops an analytical framework for analyzing rural livelihoods in terms of their sustainability and their implications for rural poverty the framework argues that our analyses of rural livelihoods need to understand them in terms of a people s access to five types of capital asset b the ways in which they combine and transform those assets in the building of livelihoods that as far as possible meet their material and their experiential needs c the ways in which people are able to expand their asset bases through engaging with other actors through relationships governed by the logics of the state market and civil society and d the ways in which they are able to deploy and enhance their capabilities both to make living more meaningful and to change the dominant rules and relationships governing the ways in which resources are controlled distributed and transformed in society particular attention is paid to the importance of social capital as an asset through which people are able to widen their access to resources and other actors

exploring relationship satisfaction between global professional service firms and local clients in emerging markets extending the perspective of agency theory this study incorporates both professional and local knowledge asymmetry into a model of relationship satisfaction between global professional service firms and their local clients the model also includes learning orientation and adaptation that are theorized to regulate the impact of knowledge asymmetry on goal incongruence which ultimately affects relationship satisfaction china was selected as the setting of the study because it is the largest emerging market has seen double digit growth of advertising expenditures for the past two decades and is home to many multinational advertising agencies that have increasingly pursued local clients as revenue sources multiple informants from 177 domestic chinese firms and their multinational advertising agencies were personally interviewed and the dyadic data were used to test the model results show that both types of knowledge asymmetry lead to goal incongruence which causes client dissatisfaction the role of learning orientation varies as does the role of adaptation in moderating the impact of knowledge asymmetry on goal incongruence and the impact of goal incongruence on relationship satisfaction theoretical and managerial implications of the findings are discussed along with the limitations of the study and future research directions

engendering social capital women workers and rural urban networks in indonesia s crisis recent approaches to social capital have cautioned against the view that social networks are resources to be called upon in times of crisis we contribute a feminist perspective to this argument and call attention to the gendered power relations of social capital and social networks we draw on field studies that examine women migrants rural urban networks in two regions of indonesia during the 1997 99 economic crisis period our findings direct attention toward the gender specific limitations of social capital as a resource for development and identify some ways in which the costs and benefits of social capital are organized by gender

the influence of retail management s use of social power on corporate ethical values employee commitment and performance recent cases in retailing reflect that ethics have a major impact on brands and performance in turn demonstrating that brand owners employees and consumers focus on ethical values in this study we analyze how various sources of social power affect corporate ethical values retailer s commitment to the retail organization and ultimately sales and service quality multi source data based on a sample of 225 retailers indicated a strong link between power ethics and commitment and that these affected output performance

perspiration versus inspiration in asian industrialisation indonesia before the crisis this article examines trends in and determinants of total factor productivity tfp in 28 manufacturing industries in indonesia over the period 1975 93 the reforms of the mid 1980s appeared to have resulted in a significant acceleration of tfp growth among the inter industry determinants of tfp growth trade policy and orientation domestic competitive pressures and ownership factors are singled out for scrutiny the trade regime and one measure of domestic competition emerge as consistently important explanatory factors

contract renegotiation and coasian dynamics consider a long term relationship between a seller and a buyer whose valuation for a per period service or a durable good is private as trade progresses the valuation will be partially revealed and it may be impossible for the parties to commit ex ante not to take advantage of this we analyse this situation first by supposing that the parties can sign a sequence of short term contracts and secondly by supposing that they can sign a long term contract but cannot commit not to renegotiate it later we find a close relationship in the second case between the optimal long term contract and the non commitment outcome in the standard coasian durable good model our results also have implications for hidden information principal agent models

limited liability contracts between principal and agent abstract the optimal strategy of the principal is examined in an environment where there are ex post limitations on the maximum penalty that can be imposed on a riskneutral agent contrary to the case in which such limitations are not imposed it is in the principal s interest to deliberately forego the opportunity to induce socially efficient behavior and to instead design a contract that induces the agent to realize an efficient outcome only in the most productive state of nature and perhaps in certain very unproductive states the properties of the contract are examined in detail

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

aggregation and linearity in the provision of intertemporal incentives we consider the problem of providing incentives over time for an agent with constant absolute risk aversion the optimal compensation scheme is found to be a linear function of a vector of n accounts which count the number of times that each of the n kinds of observable events occurs the number n is independent of the number of time periods so the accounts may entail substantial aggregation in a continuous time version of the problem the agent controls the drift rate of a vector of accounts that is subject to frequent small random fluctuations the solution is as if the problem were the static one in which the agent controls only the mean of a multivariate normal distribution and the principal is constrained to use a linear compensation rule if the principal can observe only coarser linear aggregates such as revenues costs or profits the optimal compensation scheme is then a linear function of those aggregates the combination of exponential utility normal distributions and linear compensation schemes makes computations and comparative statics easy to do as we illustrate we interpret our linearity results as deriving in part from the richness of the agent s strategy space which makes it possible for the agent to undermine and exploit complicated nonlinear functions of the accounting aggregates

modes of foreign entry a transaction cost analysis and propositions a frontier issue in international marketing is the appropriate choice of entry mode in foreign markets the objective of this paper is to offer a transaction cost framework for investigating the entry mode decision this framework provides 1 a theoretical basis for systematically interrelating the literature into propositions 2 propositions about interactions which resolve the apparently contradictory arguments advanced to date specifically the paper illustrates the feasibility of clustering 17 entry modes into the degree of control the mode provides the entrant proposes that the most appropriate i e most efficient entry mode is a function of the tradeoff between control and the cost of resource commitment advances testable propositions delimiting the circumstances under which each mode maximizes long term efficiency

grassroots organizations and ngos in rural development opportunities with diminishing states and expanding markets abstract this article undertakes to deal systematically with nongovernment organizations ngos and grassroots organizations gros usually treated as a residual category ten levels for development decision making and action are identified in the tradition of central place theory three of these are considered local or grassroots because of their collective action possibilities then three sectors are delineated instead of the usual two ngos are part of the collective action sector which differs from the public and private sectors in theoretically consistent ways a careful distinction is made between institutions and organizations usually conflated in the literature examples of accelerated rural development through grassroots organizations and ngos are discussed form asia africa and latin america

capital rationing and organizational slack in capital budgeting this paper reconciles three stylized facts about capital budgeting in firms and shows that they are tied to the presence of asymmetric information among the several members of the firm each with his or her own objectives and decisions the facts of interest are 1 the existence of organizational slack 2 the rationing of resources within organizations 3 the stated cut off rate for accepting capital projects in firms is often greater than the market rate of interest organizational slack is defined as the excess of resources allocated over the minimum necessary to accomplish the tasks assigned resource rationing is defined as the under allocation of resources i e an increase in the amount allocated would generate revenues in excess of its costs rationing and slack are both manifestations of ex post inefficiencies an lp model is used to show that these inefficiencies can occur in ex ante efficient organizational designs when asymmetric information is present the optimal allocation policy involves a hurdle rate criterion in which the hurdle rate is strictly in excess of the cost of capital thus inducing rationing in some states of the world typically resources are optimally allocated such that slack exists in other states the optimal allocation policy trades off these two inefficiencies