duopoly supergames with product differentiation abstract when goods are complements or very close substitutes more tacit collusion is supported by trigger strategies in price setting supergames than in quantity setting supergames for moderate or poor substitutes the situation is reversed this contrasts with the static situation where price setting strategies always lead to higher welfare

political influence motives and the choice between tariffs and quotas abstract tariffs and quotas are not symmetric under a variety of circumstances this paper pursues the implications of one such circumstance domestic market power for the political choice of protectionist instrument in the context of a political support maximization model tariffs dominate quotas in the political model in the absence of revenue seeking motives in the presence of revenue seeking ambiguity arises but limits can be placed on the range of tariff or quota levels also some welfare implications emerge

collaborate or consolidate assessing the competitive effects of production joint ventures we analyze collaborations in which two firms facing external competition reorganize to form an input joint venture as an alternative to horizontal merger under standard regularity conditions the collaboration can lead to higher profits than a horizontal merger though the effect on prices quantities and welfare depends on the form of downstream competition in light of our results regarding profits we provide reasons why firms might still wish to merge imperfect information cost synergies and organizational asymmetries we further consider how our comparisons change with the managerial structure of the joint venture i e by delegation of input pricing jel l13 l23 l42

national technology gaps and trade an empirical study of the influence of globalisation abstract this paper examines the hypothesis that economic internationalisation is acting to reduce the importance of national technology gaps as determinants of trade patterns and performance the cross country analysis uses two approaches to assess the dynamic nature of the relationship between national investment in technological capability proxied by both r d activity and human capital and technology intensive ti trade performance natural resource endowment and the changing impact of physical capital formation are also investigated the study includes approximately 48 nations and is based on data from the mid 1970s to 1990 the empirical evidence from one approach undertaken does not support the globalisation hypothesis as national investment in technology and human capital is shown to have maintained its link to international trade success in ti manufactures over the study period however the findings of the alternative approach are ambiguous a positive association between technology investment catch up and ongoing ti manufacturing trade performance is evident for the newly industrialised economies nics but the results suggest that an inverse relationship may apply for many of the mature western economies

multiple discreteness and product differentiation demand for carbonated soft drinks for several of the largest supermarket product categories such as carbonated soft drinks canned soups ready to eat cereals and cookies consumers regularly purchase assortments of products within the category consumers often purchase multiple products and multiple units of each alternative selected on a given trip this multiple discreteness violates the single unit purchase assumption of multinomial logit and probit models the misspecification of such demand models in categories exhibiting multiple discreteness would produce incorrect measures of consumer response to marketing mix variables in studying product strategy these models would lead to misleading managerial conclusions we use an alternative microeconomic model of demand for categories that exhibit the multiple discreteness problem recognizing the separation between the time of purchase and the time of consumption we model consumers purchasing bundles of goods in anticipation of a stream of consumption occasions before the next trip we apply the model to a panel of household purchases for carbonated soft drinks

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

structural workshop paper discrete choice models of consumer demand in marketing marketing researchers have used models of consumer demand to forecast future sales to describe and test theories of behavior and to measure the response to marketing interventions the basic framework typically starts from microfoundations of expected utility theory to obtain an econometric system that describes consumers choices over available options and to thus characterize product demand the basic framework has been augmented significantly to account for quantity choices to accommodate purchases of several products on a single purchase occasion multiple discreteness and multicategory purchases and to allow for asymmetric switching between brands across different price tiers these extensions have enabled researchers to bring the analysis to bear on several related marketing phenomena of interest this paper has three main objectives the first objective is to articulate the main goals of demand analysis forecasting measurement and testing and to highlight several considerations associated with these goals our second objective is to describe the main building blocks of individual level demand models we discuss approaches built on direct and indirect utility specifications of demand systems and we review extensions that have appeared in the marketing literature the third objective is to explore a few emerging directions in demand analysis including considering demand side dynamics combining purchase data with primary information and using semiparametric and nonparametric approaches we hope researchers new to this literature will take away a broader perspective on these models and see the potential for new directions in future research

technological intensity concept and measurement abstract technological intensity the degree to which scientific research effort contributes to an industry s productivity increase and or revenue enhancement is commonly measured by the industry s ratio of own performed research to its output if this r d output percentage is taken as an indicator of the need for public support it is seriously misleading an industry benefits as well by research undertaken by the foreign affiliates of its member firms by its first and higher round suppliers and by university and government laboratories this view is supported by evidence from canada

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

integrating distribution strategy and tactics a model and an application designing distribution systems requires two decisions one strategic i e the number of levels between the producer and the customer and the other tactical i e channel management policies such as trade discounts and rebates while the modeling literature focuses on one or the other evidence from the field indicates that the two decisions are in fact interactive in this paper we develop and then apply an integrated model that solves the strategic issue of channel levels and the tactical issue of price rebates simultaneously

coexistence of strategic vertical separation and integration abstract this paper gives conditions under which vertical separation is chosen by some upstream firms while vertical integration is chosen by others in the equilibrium of a symmetric model a vertically separating firm trades off fixed contracting costs against the strategic benefit of writing a two part tariff exclusive dealing contract with its retailer coexistence emerges when more than two vertical cournot oligopolists supply close substitutes when vertical integration and separation coexist welfare could be improved by reducing the number of vertically separating firms the scope for coexistence diminishes when assumptions on contract observability and commitment are relaxed

designing price contracts for boundedly rational customers does the number of blocks matter when designing price contracts one of the major questions confronting managers is how many blocks there should be in the contract we investigate this question in the setting of a manufacturer retailer dyad facing a linear deterministic consumer demand theoretical marketing models predict that the manufacturer s profits rise dramatically when the number of blocks in the contract is increased from one to two because both channel efficiency and its share of channel profits increase however increasing the number of blocks to three yields no incremental profits we test these predictions experimentally and find that increasing the number of blocks from one to two raises channel efficiency but not the manufacturer s share of profits surprisingly having three blocks in the contract increases channel efficiency even further and also gives the manufacturer a slightly higher share of profits we show that these results can be explained by a quantal response equilibrium model in which the manufacturer accounts for noisy best response due to nonpecuniary payoff components in the retailer s utility we also show that the retailer is sensitive to the counterfactual profits it could have earned if it were charged a lower marginal price for earlier blocks in the multiple block contract

competition in durable goods markets the strategic consequences of leasing and selling in marketing durable goods manufacturers use varying degrees of leasing and selling to consumers e g cars photo copiers personal computers airplanes etc the question that this raises is whether the distinction between leases and sales is simply one of price or whether the proportion of leases and sales effects a firm s ability to compete in the market in this paper we use two approaches to argue that leasing and selling create strategic consequences that extend beyond prices first we develop a stylized theoretical model that shows that the optimal proportion of leases and sales depends on the competitiveness of the market and on the inherent reliability of the firm s product and second we find support for the implications of our theoretical model with data from the automobile industry the u s automobile industry has seen a large increase in leasing over the last five years however the extent to which leasing has been embraced varies widely across manufacturers for example in 1993 the sport utility segment had the following lease percentages ford explorer 29 jeep grand cherokee 24 toyota 4 runner 11 and chevrolet blazer 9 in addition manufacturers often vary lease percentages across models for example in 1993 ford leased 22 of its crown victoria model 35 of its taurus model and 42 of its probe model a popular argument for why we see these differences is that higher priced cars are leased more often because leasing makes them more affordable however this rationale is not compelling in the face of our data for example the ford probe was priced significantly lower than the crown victoria and yet it was leased almost twice as often to develop a better understanding of why we observe differences in the proportion of leasing we develop a two period model of a duopoly in which each manufacturer chooses its optimal quantity and the fraction of units it wants to lease we find that in equilibrium neither firm leases all its units either they use a mix of leasing and selling or they use only selling our analysis suggests that the fraction of leased cars decreases as the manufacturers products become more similar and the competition between them increases the intuition for this result is that a higher fraction of leases puts the firm at a competitive disadvantage in the future this occurs because unlike firms that sell their product firms that lease are at a price disadvantage another important finding in this paper is that the extent of leasing chosen by a manufacturer depends on the reliability of its product in particular all else being equal the lower a product s reliability the lower its proportion of leases within the context of the automobile industry this suggests that more expensive cars may be leased more often because they are of higher quality and not necessarily because they are more expensive finally we test the implications of our theoretical model with data from the u s automobile market in particular for 1993 model year cars we develop a measure of reliability using data from consumer reports in addition we develop a measure of the extent of competition in each segment of the automobile market we support our hypotheses by finding that the extent to which a car model is leased depends strongly on its predicted reliability and on the competitive intensity within the segment

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

optimal franchising in oligopolistic markets with uncertain demand abstract if oligopolistic firms can observe and enforce retail prices upon their retailers they may select to do so if retailers have private information about an uncertain state of the demand delegating the pricing decision to the retailer has both an advantageous effect of alleviating price competition among firms and a disadvantageous effect of transferring surplus from the firm to its agent the disadvantageous effect may be dominant if the products produced by the firms are sufficiently differentiated and or the degree of prior uncertainty about the demand is sufficiently high

on credible delegation by oligopolists a discussion of distribution channel management several papers in the recent marketing literature have suggested that delegation in distribution e g the use of independent middlemen helps manufacturers to precommit strategically to profit enhancing competitive actions further the literature suggests that the profitability of such actions depends on market structure we challenge these conclusions here this is done in two steps first we perform an analysis of the entire class of models which have been used in the literature using internally consistent assumptions about market structure and contracting the only subgame perfect equilibrium is one in which all distribution channels have infinitely many levels of delegation obviously this is not what we see in the real world next we relax a key hidden assumption namely that all intra channel agreements are observable to competitors without this assumption the usual results unravel unless channel members can offer credible guarantees that unobservable agreements do not exist the strategic effects of delegation disappear since these guarantees are virtually impossible to maintain credibly we would expect to reject the hypothesis in the earlier literature relating channel structure to competition in an empirical study controlling for observability we conclude that mechanisms other than strategic ones must be responsible for the existence of delegated channels and make some suggestions about promising avenues for future theory research in channel structure

coordinating channels under price and nonprice competition this paper analyzes how manufacturers should coordinate distribution channels when retailers compete in price as well as important nonprice factors such as the provision of product information free repair faster check out or after sales service differentiation among retailers in price and nonprice service factors is a central feature of markets ranging from automobiles and appliances to gasoline and is especially observed in the coexistence of high service retailers and lower price discount retailers therefore how a manufacturer should manage retail differentiation is an important channel management question yet the approach in the existing literature has been to examine channel coordination under the standard symmetric contracting assumption that offering a uniform contract to all the retailers in a market will be sufficient for coordination i bring this assumption into question and ask when is it optimal for the manufacturer to use the channel contract to deliberately induce retail differentiation even if the retailers were ex ante identical in their cost and other characteristics the paper identifies the type of channel contracts that can endogenously induce symmetry as opposed to differentiation among retailers next the paper highlights a type of channel conflict that arises from the very nature of retail price service competition a manufacturer might find the retailers to be excessively biased towards price competition at the cost of service provision or vice versa the paper establishes when a manufacturer is likely to stimulate greater price as opposed to greater service competition among the retailers the framework that i develop to address these issues highlights the role of two basic types of consumer heterogeneity consumers are heterogeneous in their locations as in the spatial models of horizontal differentiation and in their willingness to pay for retail services as in the models of vertical differentiation the model also uses a natural relationship in retail markets between the travel time cost incurred by a consumer and her willingness to pay the more affluent consumers who have a higher willingness to pay for retail services also have a higher cost for their personal time given these market features the paper analyzes the problem faced by a manufacturer who sells to competing retailers the paper shows that the standard notion in the literature of offering similar contracts to all the retailers is sufficient only in markets with substantial locational differentiation relative to the differences in the willingness to pay effective channel management in these markets simply requires mechanisms that ensure that retailer interests are aligned so that they compete by offering a mix of price and service that is desirable from the manufacturer s point of view however in markets with small locational differentiation and substantial diversity in consumer willingness to pay the manufacturer s problem is not just to align retailer interests but to also use the channel contract to induce the correct level of retail differentiation this helps the manufacturer to better cater to the diversity in consumer willingness to pay and to prevent the cut throat competition that the retailers would otherwise have indulged in the manufacturer can achieve this through the use of menu based contracts menu based contracts induce differentiated retailer behavior despite the fact that the retailers are not forced into accepting different terms of trade this aspect can be useful in shielding manufacturers from litigation under the robinson patman act the paper also shows that for relatively high ticket items retailers tend to be excessively biased towards competing in the provision of retail services the correlation between consumer willingness to pay for service and travel costs implies that for high ticket products the competing retailers will focus on the more service sensitive customers at the cost of ignoring the price sensitive consumers in the market the manufacturer is therefore likely to encourage greater price competition among the retailers in contrast for low ticket items the manufacturer prefers to reduce price competition and encourage greater provision of services this provides an endogenous rationale for the use of price ceilings versus floors the basic model is also extended to consider the effect of upstream competition between manufacturers under upstream competition coordinating retail price and service decisions is not always optimal for an individual manufacturer this extension to manufacturer competition provides a basis for understanding the role of retail price service differentiation in the context of a channel duopoly it also shows that a mixed distribution channel a channel in which one manufacturer chooses to be coordinated while the other chooses to be noncoordinated can be an equilibrium in markets with weak brand loyalty

pollution policy and trade liberalization of environmental goods during the doha round at the world trade organization reductions in trade barriers on environmental goods eg were put forward as a means of helping developed and developing countries alike deal with current environmental problems we examine the potential effectiveness of such a strategy in a developing country that imports all its consumption of eg from an imperfectly competitive foreign eco industry we point out that trade liberalization of eg might in fact lead to less stringent pollution taxes which can result in an actual rise in pollution levels we then show that the environmental effectiveness objective of this trade reform can be achieved when the regulator uses quantitative abatement standards as an alternative pollution policy instrument however this environmental achievement comes at the expense of social welfare

prices rise faster than they fall output prices tend to respond faster to input increases than to decreases this tendency is found in more than two of every three markets examined it is found as frequently in producer goods markets as in consumer goods markets in both kinds of markets the asymmetric response to cost shocks is substantial and durable on average the immediate response to a positive cost shock is at least twice the response to a negative shock and that difference is sustained for at least five to eight months unlike past studies which documented similar asymmetries in selected markets gasoline agricultural products etc this one uses large samples of diverse products 77 consumer and 165 producer goods accordingly the results suggest a gap in an essential part of economic theory as a start on filling this gap the study finds no asymmetry in the resonse of an individual decision maker a supermarket chain to its costs but it finds above average asymmetry where a cost shock is filtered through a fragmented w

own brand and cross brand retail pass through in this paper we describe the pass through behavior of a major u s supermarket chain for 78 products across 11 categories our data set includes retail prices and wholesale prices for stores in 15 retail price zones for a one year period for the empirical model we use a reduced form approach that focuses directly on equilibrium prices as a function of exogenous supply and demand shifting variables the reduced form approach enables us to identify the theoretical pass through rate without specific assumptions about the form of consumer demand or the conduct of a category pricing manager thus our measurements of pass through are not constrained by specific structure on the underlying economic model the empirical pricing model includes costs of all competing products in the category on the right hand side not only the cost of the focal brand and yields estimates of both own brand and cross brand pass through rates our results provide a rich picture of the retailer s pass through behavior we find that pass through varies substantially across products and across categories own brand pass through rates are on average more than 60 for 9 of 11 categories a finding that is at odds with the claims of manufacturers about retailers in general importantly we find substantial evidence of cross brand pass through effects indicating that retail prices of competing products are adjusted in response to a change in the wholesale price of any given product in the category we find that cross brand pass through rates are both positive and negative we explore determinants of own brand and cross brand pass through rates and find strong evidence in multiple categories of asymmetric retailer response to trade promotions on large versus small brands for example brands with larger market shares and brands that contribute more to retailer profits in the category receive higher pass through we also find that trade promotions on large brands are less likely than small brands to generate positive cross brand pass through i e induce the retailer to reduce the retail price of competing smaller products on the other hand small share brands are disadvantaged along three dimensions trade promotions on small brands receive low own brand pass through and generate positive cross brand pass through for larger competing brands moreover small share brands do not receive positive cross pass through from trade promotions on these larger competitors we also find that store brands are similarly disadvantaged with respect to national brands

competing manufacturers in a retail supply chain on contractual form and coordination it is common for a retailer to sell products from competing manufacturers how then should the firms manage their contract negotiations the supply chain coordination literature focuses either on a single manufacturer selling to a single retailer or one manufacturer selling to many possibly competing retailers we find that some key conclusions from those market structures do not apply in our setting where multiple manufacturers sell through a single retailer we allow the manufacturers to compete for the retailer s business using one of three types of contracts a wholesale price contract a quantity discount contract or a two part tariff it is well known that the latter two more sophisticated contracts enable the manufacturer to coordinate the supply chain thereby maximizing the profits available to the firms more importantly they allow the manufacturer to extract rents from the retailer in theory allowing the manufacturer to leave the retailer with only her reservation profit however we show that in our market structure these two sophisticated contracts force the manufacturers to compete more aggressively relative to when they only offer wholesale price contracts and this may leave them worse off and the retailer substantially better off in other words although in a serial supply chain a retailer may have just cause to fear quantity discounts and two part tariffs a retailer may actually prefer those contracts when offered by competing manufacturers we conclude that the properties a contractual form exhibits in a one manufacturer supply chain may not carry over to the realistic setting in which multiple manufacturers must compete to sell their goods through the same retailer

slotting allowances as a facilitating practice by food processors in wholesale grocery markets profitability and welfare effects slotting allowances which are lump sum transfers paid by food manufacturers to grocery retailers in return for various retail concessions are becoming increasingly common in wholesale grocery markets this article extends the literature on slotting allowances by considering two features that previously have been ignored the role of food processors in determining these pricing arrangements and the effect of slotting allowances on the size and distribution of economic surplus slotting allowances motivated by food processors increase procurement quantities and farm prices and this raises farm surplus increases total producer surplus and improves consumer welfare in the food system

applied welfare economics with discrete choice models economists have been paying increasing attention to the study of situations in which consumers face a discrete rather than a continuous set of choices such models are potentially very important in evaluating the impact of government programs upon consumer welfare but very little has been said in general regarding the tools of applied welfare economics indiscrete choice situations this paper shows how the conventional methods of applied welfare economics can be modified to handle such cases it focuses on the computation of the excess burden of taxation and the evaluation of quality change the results are applied to stochastic utility models including the popular cases of probit and logit analysis throughout the emphasis is on providing rigorous guidelines for carrying out applied work this abstract was borrowed from another version of this item

mergers with differentiated products the case of the ready to eat cereal industry traditional merger analysis is difficult to implement when evaluating mergers in industries with differentiated products i discuss an alternative which consists of demand estimation and the use of a model of postmerger conduct to simulate the competitive effects of a merger i estimate a brand level demand system for ready to eat cereal using supermarket scanner data and use the estimates to 1 recover marginal costs 2 simulate postmerger price equilibria and 3 compute welfare effects under a variety of assumptions the methodology is applied to five mergers two of which occurred and for which i compare predicted to actual outcomes

manufacturer retailer channel interactions and implications for channel power an empirical investigation of pricing in a local market the issue of power in the marketing channels for consumer products has received considerable attention in both academic and practitioner journals as well as in the popular press our objective in this paper is to provide an empirical method to measure the power of channel members and to understand the reasons demand factors cost factors nature of channel interactions for this power we confine our analysis to pricing power in channels we use methods from the game theory literature in marketing on channel interactions to obtain the theoretical framework for our empirical model this literature provides us a definition of power one that is based on the proportion or percentage of channel profits that accrue to each of the channel members there can be a variety of possible channel interactions between manufacturers and retailers in channels the theoretical literature has examined some of these games for example choi 1991 examines how channel profits for manufacturers and retailer vary if channel interactions are either vertical nash or if they are stackelberg leaderfollower with either the manufacturer or the retailer being the price leader each of these three channel interaction games has different implications for profits made by manufacturers and retailers and consequently for the relative power of the channel members in contrast to the previous literature that has focused largely on the above three channel interaction games our model extends the game theoretic literature by allowing for a continuum of possible channel interactions between manufacturers and a retailer furthermore for a given product market we empirically estimate from the data where the channel interactions lie in this continuum more critically we obtain measures of how channel profits are divided between manufacturers and the retailer in the product market where a higher share of channel profit is associated with higher channel power we then examine how channel power is related to demand conditions facing various brands and cost parameters of various manufacturers in going from game theory based theoretical models of channel interactions to empirical estimation we use the new empirical industrial organization framework bresnahan 1988 as part of this structural modeling framework we build retail level demand functions for the various brands manufacturer and private label in a given product category given these demand functions we obtain optimal pricing rules for manufacturers and the retailer in determining their optimal prices manufacturers and the retailer account for how all the players in the channel choose their optimal prices that is we account for dependencies in decision making across channel members these dependencies are characterized by a set of conduct parameters which are estimated from market data the conduct parameters enable us to identify the nature of channel interactions between manufacturers and the retailer along the continuum mentioned previously in addition to the demand and conduct parameters manufacturers marginal costs are also estimated in the model these marginal cost estimates along with the manufacturer prices and retail prices available in our dataset enable us to compute the division of channel profits among the channel members hence we are able to obtain insights into who has pricing power in the channel in the empirical application of the model we analyze a local market for two product categories refrigerated juice and tuna in both categories there are three major brands the difference between them is that the private label has an insignificant market share in the tuna category our main empirical results show that the usual games examined in the marketing literature do not hold for the given data we also nd that the retailer s market power is very significant in both these product categories and that the estimated demand and cost parameters are consistent with the estimated pattern of conduct between the manufacturers and the retailer given the evidence from the trade press of intense manufacturer competition in these categories as well as the commodity nature of these products the result of retailer power appears intuitive

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

improving channel coordination through franchising in this paper we explore the role of franchising arrangements in improving coordination between channel members in particular we focus on two elements of the franchising contract namely the royalty structure and the monitoring technology we begin with a simple analysis where a manufacturer distributes its product through a retailer and the retail demand is affected by the retail price and the service provided by the retailer in this context we show that neither royalty payments nor monitoring are needed for full coordination we then extend the model to allow for free riding by franchisees and show that although monitoring helps affect the behavior of the franchisees royalty payments are still unnecessary to coordinate the activities of the franchisor and the franchisees finally we show that in environments where factors affecting retail sales are controlled by both the franchisor and the franchisee royalty payments provide the necessary incentives for the franchisor while monitoring systems are used to ensure that franchisees also behave in the best interest of the channel our general results are found to be consistent with those in brickley and dark 1987 and norton 1988 who conclude that franchising is affected by principal agent problems our theory finds special support in the work of lafontaine 1988 where it is concluded that the incidence of franchising is related to cost of monitoring and the importance of franchisor investments

the value of marketing expertise this paper has three objectives 1 to construct a theoretical model that aids in evaluating marketing expertise 2 to use that theoretical model to identify factors influencing the value of marketing expertise and 3 to empirically test the model by observing how different market conditions influence whether companies emphasize marketing expertise we accomplish these objectives as follows first we use decision theory to find an expression for the expected value of marketing expertise we do not use decision analysis in the normative tradition nor do we assume that firms actually use formal decision analysis rather we assume that firms are rational and that decision theory describes their actions given that assumption we predict how firms should evaluate marketing here marketing expertise helps a firm make better marketing decisions at least on average hence the value of marketing expertise increases as marketing decisions become more important second consistent with decision theory

measuring market power in the ready to eat cereal industry the ready to eat cereal industry is characterized by high concentration high price cost margins large advertising to sales ratios and numerous introductions of new products previous researchers have concluded that the ready to eat cereal industry is a classic example of an industry with nearly collusive pricing behavior and intense nonprice competition this paper empirically examines this conclusion in particular i estimate price cost margins but more importantly i am able empirically to separate these margins into three sources i that which is due to product differentiation ii that which is due to multi product firm pricing and iii that due to potential price collusion the results suggest that given the demand for different brands of cereal the first two effects explain most of the observed price cost margins i conclude that prices in the industry are consistent with noncollusive pricing behavior despite the high price cost margins leading firms are able to maintain a portfolio of differentiated products and influence the perceived product quality it is these two factors that lead to high price cost margins

the spanish retail petroleum market new patterns of competition since the liberalization of the industry in this paper we study the recent development of the spanish automotive fuels market in the context of a long process of liberalization and competition our aims are twofold first to overview the market s current patterns of competition while taking into account the political structural and strategic aspects that have marked the industry s recent evolution second to study in depth one competitive strategy that nowadays significantly influences competition and final prices the vertical relationships between operators and service stations our analysis draws attention to several indicators that may demonstrate the success of the opening and liberalization process increased levels of competition have stimulated the sector s growth development and modernization and given national firms an excellent platform for competing with newcomers furthermore studying the vertical agreements has produced interesting results we have found that relative price differences among brands increase in line with perceived quality differences and that the vertical separation of refineries and retailers eases price competition in the final market the empirical evidence was backed up with a database of 4164 spanish service stations

excessive retailing at the bertrand equilibria in oligopolistic markets where competition is in prices producers may prefer to be represented by agents that sell their products even if those agents do not provide any direct services to promote the sale of the product and even if contracting is costly contracting with the agents serves as a medium to relieve competitive pressures in the product market the benefit that a single firm derives from contracting is an increasing function of the number of firms that have already contracted with agents hence if the contracting cost is relatively low there exists a unique equilibrium where all firms contract with agents

the strategic value of partial vertical integration we investigate the strategic incentives for partial vertical integration namely partial ownership agreements between manufacturers and retailers when retailers privately know their costs and engage in price competition with differentiated goods the partial misalignment between the profit objectives within a partially integrated manufacturer retailer hierarchy implies a higher retail price than under full integration this information vertical effect translates into a competition horizontal effect the partially integrated hierarchy s commitment to a higher price induces the competitor to increase its price which strategically relaxes competition our analysis provides implications for vertical merger policy and theoretical support for the recently documented empirical evidence on partial vertical acquisitions

pooling access and countervailing power in channel governance fruit and vegetable marketing organization the greenery has experienced various governance structure changes like horizontal merger forward integration and the emergence of grower associations a multilateral incomplete contracting model is presented to account for these changes by analysing the interactions between pooling access and countervailing power this model does not only explain the changes at the greenery but it contributes also to the design of efficient channel governance this paper was accepted by pradeep chintagunta and preyas desai special issue editors this paper was accepted by pradeep chintagunta and preyas desai special issue editors

vertical separation with private contracts we consider a manufacturer s incentive to sell through an independent retailer rather than directly to final consumers when contracts with retailers cannot be observed by competitors if retailers conjecture that identical competing manufacturers always offer identical contracts symmetric beliefs manufacturers choose vertical separation in equilibrium even with private contracts vertically separated manufacturers reduce competition and increase profits by inducing less aggressive behaviour by retailers in the final market manufacturers profits may be higher with private than with public contracts our results hold both with price and with quantity competition and do not hinge on retailers beliefs being perfectly symmetric we also discuss various justifications for symmetric beliefs including incomplete information

international trade and industrial organization this survey reviews recent contributions to the interface between international trade and industrial organization import competition places a substantial limit on domestic market power in the short run competitive conditions can influence the speed and efficiency of a domestic market s adjustment to international disturbances exports effects on competition among national sellers are unclear and depend on the scope for price discrimination models of trade with monopolistic competition explain intra industry trade and also the widely observed sensitivity of firm size to market size exposure to trade also increases the technical efficiency of production diverse policy issues turn on the distinction between national and global welfare and the scope for commitment

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

structural analysis of manufacturer pricing in the presence of a strategic retailer consumer goods manufacturers usually sell their brands to consumers through common independent retailers theoretical research on such channel structures has analyzed the optimal behavior of channel members under alternative assumptions of manufacturer retailer interaction vertical strategic interaction research in empirical industrial organization has focused on analyzing the competitive interactions between manufacturers horizontal strategic interaction decision support systems have made various assumptions about retailer pricing rules e g constant markup category profit maximization the appropriateness of such assumptions about strategic behavior for any specific market however is an empirical question this paper therefore empirically infers 1 the vertical strategic interaction vsi between manufacturers and retailer 2 the horizontal strategic interaction hsi between manufacturers simultaneously with the vsi and 3 the pricing rule used by a retailer the approach is particularly appealing because it can be used with widely available scanner data where there is no information on wholesale prices researchers usually have no access to wholesale prices even manufacturers who have access to their own wholesale prices usually have limited information on competitors wholesale prices in the absence of wholesale prices we derive formulae for wholesale prices using game theoretic solution techniques under the specific assumptions of vertical and horizontal strategic interaction and retailer pricing rules we then embed the formulae for wholesale prices into the estimation equations while our empirical illustration is using scanner data without wholesale prices the model itself can be applied when wholesale prices are available early research on the inference of hsi among manufacturers in setting wholesale prices using scanner data e g kadiyali et al 1996 1999 made the simplifying assumption that retailers charge a constant margin this assumption enabled them to infer wholesale prices and analyze competitive interactions between manufacturers in this paper we show that this model is econometrically identical to a model that measures retail price coordination across brands hence the inferred cooperation among manufacturers could be exaggerated by the coordinated pricing category management done by the retailer we find empirical support for this argument this highlights the need to properly model and infer vsi simultaneously to accurately estimate the hsi when using data at the retail level functional forms of demand have been evaluated in terms of the fit of the model to sales data but recent theoretical research on channels lee and staelin 1997 tyagi 1999 has shown that the functional form has serious implications for strategic behavior such as retail passthrough while the logit and linear model implies equilibrium passthrough of less than 100 lee and staelin call this vertical strategic substitute vss the multiplicative model implies optimal passthrough of greater than 100 vertical strategic complement vsc because passthrough rates on promotions have been found to be below or above 100 chevalier and curhan 1976 armstrong 1991 we empirically test the appropriateness of the logit vss and the multiplicative vsc functional form for the data we perform our analysis in the yogurt and peanut butter categories for the two biggest stores in a local market we found that the vss implications of the logit fit the data better than the multiplicative model we also find that for both categories the best fitting model is one in which 1 the retailer maximizes category profits 2 the vsi is manufacturer stackelberg and 3 manufacturer pricing hsi is tacitly collusive the fact that the retailer maximizes category profits is consistent with theoretical expectations the inference that the vsi is manufacturer stackelberg reflects the institutional reality of the timing of the game retailers set their retail prices after manufacturers set their wholesale prices note that in the stores and product categories that we analyze the two manufacturers own the dominant brands with combined market shares of about 82 in the yogurt market and 65 in the peanut butter market the result is also consistent with a balance of power argument in the literature the finding that manufacturer pricing is tacitly collusive is consistent with the argument that firms involved in long term competition in concentrated markets can achieve tacit collusion managers use decision support systems for promotion planning that routinely make assumptions about vsi hsi and the functional form the results from our analysis are of substantive import in judging the appropriateness of assumptions made in such decision support systems

sharing demand information in competing supply chains with production diseconomies this paper studies the incentive for vertical information sharing in competing supply chains with production technologies that exhibit diseconomies of scale we consider a model of two supply chains each consisting of one manufacturer selling to one retailer with the retailers engaging in cournot or bertrand competition for cournot retail competition we show that information sharing benefits a supply chain when 1 the production diseconomy is large and 2 either competition is less intense or at least one retailer s information is less accurate a supply chain may become worse off when making its information more accurate or production diseconomy smaller if such an improvement induces the firms in the rival supply chain to cease sharing information for bertrand retail competition we show that information sharing benefits a supply chain when 1 the production diseconomy is large and 2 either competition is less intense or information is more accurate under bertrand competition a manufacturer may be worse off by receiving information which is never the case under cournot competition information sharing in one supply chain triggers a competitive reaction from the other supply chain and this reaction is damaging to the first supply chain under cournot competition but may be beneficial under bertrand competition this paper was accepted by martin lariviere operations management

product positioning and competition the role of location in the fast food industry this paper examines optimal product positioning strategies of asymmetric firms in the context of retail outlet locations in the fast food industry the relationships between profits and product differentiation reveal that both mcdonald s and burger king are better off avoiding close competition if the market area is large enough however in small market areas mcdonald s would prefer to be located together with burger king rather than have the two outlets be only a slight distance apart in contrast burger king s profits always increase with greater differentiation offsetting these incentives is the desirability of locating centrally to appeal to the most customers the equilibrium depends on the market s size in small markets mcdonald s locates near the center of the market and burger king locates to the side of the market in larger markets mcdonald s and burger king choose locations on opposite sides of the market although mcdonald s locates closer to the optimal central location than burger king i also show that the role of price competition on product positioning is fundamentally different under asymmetric competition than under symmetric competition price competition unambiguously induces symmetric firms toward differentiation in contrast with asymmetric firms price competition shifts burger king s incentives toward locating closer to mcdonald s even while price competition increases mcdonald s desire for differentiation as a result equilibrium locations with asymmetric firms are approximately the same regardless of whether prices adjust with location

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

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

does culture still matter the effects of individualism on national innovation rates abstract does a society s culture affect its rate of inventive activity this article analyzes several independent datasets of culture and innovation from 62 countries spanning more than two decades it finds that most measures of individualism have a strong significant and positive effect on innovation even when controlling for major policy variables however the data also suggest that a certain type of collectivism i e patriotism and nationalism can also foster innovation at the national level meanwhile other types of collectivism i e familism and localism not only harm innovation rates but may hurt progress in science worse than technology

targeted export subsidies as an exercise of monopoly power a country with monopoly power in its export good normally benefits from an export tax however if it exports to two countries and the tax on exports to one is suboptimal then it may be best to subsidize exports to the other this is more likely the smaller is the import demand elasticity in the country being taxed suboptimally and the larger the elasticity in the other it is also more likely the larger are exports to the first and the smaller are exports to the other finally it is more likely the less elastic is home export supply

r d effort and us exports and foreign affiliate production of manufactures abstract this paper examines the relationship between us r d expenditures and the pattern of us manufacturing exports and foreign affiliate sales across industries and regions for the years 1966 and 1976 while differences in relative research capability between the united states and the rest of the world have narrowed over this period research effort still significantly explains the pattern of us sales in foreign markets for any region the export and foreign affiliate sales performance of research intensive industries exceeds that of non research intensive industries the relative performance of the formed is greater in regions with larger market size and high per capita income the analysis also reveals that over the time period studied the ratio of us exports to foreign affiliate sales has generally fallen for all industries and foreign markets these observations accord with a broad interpretation of the product cycle theory while the united states has lost its uniqueness as a location of innovation the ability to develop and market new products through r d expenditures is still a strong force behind its exports and sale abroad the decrease in exports relative to foreign affiliate sales may reflect a more rapid shift in comparative advantage in the production of such products to foreign locations hence the positive effect on us exports of development of any given new product may be becoming more short lived

transaction cost theory inferences from clinical field research on downstream vertical integration a bulk of the marketing research on distribution channel design attempts to resolve the question of when a direct company owned sales operation would be preferred to an indirect independent distributor operation the widely accepted theoretical rationale is provided by transaction cost theory which indicates that the total costs of going to market inclusive of distribution as well as its administration is likely to be lower for the direct option when the sales transactions require investments in unique assets for effectively serving the end customer examples of unique assets are account specific sales teams and account dedicated repair and maintenance facilities conversely transaction cost theory indicates that an indirect option would be the more efficient one for sales transactions that require investments only in nonunique assets such as an inventory of standard parts since its formulation in 1975 the transaction cost framework has been empirically confirmed in a variety of marketing channel se

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

a technology gap approach to why growth rates differ abstract this paper contains a discussion and test of the technology gap approach to development and growth the basic hypotheses of the theory are tested on pooled cross sectional and time series data for 25 industrial countries for the period 1960 1983 the sample includes in addition to 19 oecd countries 6 of the most important industrial economies from the non oecd area the findings of the paper confirm that there exists a close correlation between the level of economic development measured as gdp per capita and the level of technological development measured through r d or patent statistics furthermore for the group of 25 countries as a whole technology gap models of economic growth are found to explain a large part of the actual differences in growth rates both between countries and periods as expected both the scope for imitation growth in innovative activity and efforts to narrow the gap investment appear as powerful explanatory factors of economic growth however when the non oecd countries and later usa and japan are removed from the sample the explanatory power of the technology variables especially growth in innovative activity diminishes

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

science and technology in united states foreign trade economists generally believe that modern science technology such as the presence of scientists and engineers or research and development is a central factor in the comparative advantage of advanced industrial nations however most discussion of this topic rests on cross industry regressions which leamer and bowen i981 do not provide a valid indication of factor abundance so the overall role of science still remains to be established in addition much remains to be known about the role of different facets of science and innovation in the process of generating comparative advantage there are two fundamentally different ways of understanding technological differences between countries one point of view adopted in the standard neoclassical theory of international trade assumes all countries are on the same production function under these circumstances relative factor abundance determines the factor services which a country exports or imports within this perspective one can make progress towards an understanding of the role of science and technology in international trade by dividing science into many highly specific narrowly defined input factors calculations can then determine the relative abundance of those inputs associated with science technology versus other input factors in a given country or the relative abundance of different elements within the broad area of overall science technology quite another procedure assumes there are substantial differences in the production possibilities faced by different countries for example krugman i979 recently argued that advantages in innovation and lags in the diffusion of knowledge are the basic influences which permit incomes to be higher in the industrialised world than in developing nations this view illustrates the potential economic significance of innovation in advanced countries since the generation of new technologies in industrialised countries and their diffusion to the rest of the world then essentially determines world income distribution and world economic development however empirical implementation of the diffusion viewpoint requires data for many countries which greatly limits the number of facets of technology which can be considered since the present paper is centrally concerned with the effect which a wide variety of technological elements has on international trade we choose to select a framework within which the ample data available on different aspects of technology in the united states can be utilised the first view of technological

vertical relationships between manufacturers and retailers inference with limited data in this paper different models of vertical relationships between manufacturers and retailers in the supermarket industry are compared demand estimates are used to compute price cost margins for retailers and manufacturers under different supply models when wholesale prices are not observed the purpose is to identify the set of margins compatible with the margins obtained from estimates of cost and to select the model most consistent with the data among non nested competing models the models considered are 1 a simple linear pricing model 2 a vertically integrated model and 3 a variety of alternative strategic supply scenarios that allow for collusion non linear pricing and strategic behaviour with respect to private label products using data on yogurt sold in several stores in a large urban area of the u s the results imply that wholesale prices are close to marginal cost and that retailers have pricing power in the vertical chain this is consistent with non linear pricing by the manufacturers or high bargaining power of the retailers

research and development human capital and trade performance in technology intensive manufactures a cross country analysis abstract this paper comprises an extensive examination of the relationship between commonly utilized policy indicators of national technological capability and observed trade success in technology intensive manufactures across 52 countries in the 1980s a central focus is the relative performance of policy indicators which directly measure innovative activity such as patent output and expenditure and employed scientists and engineers in r d versus those measuring general efforts at increasing national levels of human capital the study design is guided by the inter country intrasectoral approach outlined by dosi et al 19 it emphasizes differences in trade performance based on the notion of international competitiveness but also compares results for conventional revealed comparative advantage indices the large number of countries included and the nature of the policy objectives adopted have necessitated a highly aggregated approach using nation wide attributes and trade in one broad technologyintensive sector as the measure of demonstrated international competitiveness simple correlation and multiple regression techniques are used to assess the association of four main sets of national attributes indicators of direct innovative activity general human capital development physical capital formation and natural resource endowment with technology intensive trade performance the empirical findings provide further support for the importance of national differences in technological capability as a determinant of structural and international competitiveness within the technology intensive sector of production they suggest that policy indicators measuring actual innovative activity and physical capital formation have a much closer link to technology intensive trade than the general educational effort or output indicators demand side measures which proxy the actual employment and application of resources for r d purposes demonstrate the strength of association required for reliable policy evaluation of real national differences in technological capability the poor performance of the general human capital supply variables highlights the need for a careful consideration of the optimality of the allocation of substantial levels of scarce national resources to broad based educational output a number of other significant results concerning the link between technology indicators technology intensive trade and economic performance are discussed

entry and product variety with competing supply chains we study a model where an endogenous number of competing manufacturers located around a circle contract with exclusive retailers who are privately informed about their costs the number of brands in the market determined by the manufacturers zero profit condition depends on the presence of asymmetric information and on the types of contracts between manufacturers and retailers with two part tariffs wholesale prices fully reflect retailers costs with linear contracts wholesale prices are constant and independent of retailers costs the number of brands is lower resp higher with asymmetric information than with complete information when contracts are linear resp with two part tariffs moreover although the number of brands is always higher with linear contracts than with two part tariffs joint profits of manufacturers and retailers are higher with linear prices we also discuss manufacturers incentives to choose different contract forms and analyze the effects of endogenous entry on welfare

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

strategic interactions between channel structure and demand enhancing services in this paper we investigate how opportunities to invest in demand enhancing services for a product line affect the interactions between a manufacturer and her dealer many demand enhancing services e g after sales support warranty repair etc can be provided either by the manufacturer or they can be delegated to the dealer we first show that when a manufacturer retains control of such services the dealer will have an incentive to choose a decentralized organizational structure as a means of committing to non product line pricing since this will encourage the manufacturer to invest more in demand enhancing services we then consider a game that is played between the manufacturer and the dealer in which the dealer chooses between centralized product line pricing or decentralized non product line pricing operations and the manufacturer chooses between insourcing the services i e providing them herself or outsourcing them to the dealer we find that the equilibrium depends on which if any channel partner has the ability to act as a stackelberg leader if the dealer can move first then the equilibrium will always be outsourced services and centralized dealer operations however if either the manufacturer moves first or if neither partner can move first then the equilibrium can be either insourced services and decentralized dealer operations or outsourced service and centralized dealer operations

research note the effects of costs and competition on slotting allowances we consider the optimal two part tariff contract between a manufacturer and a retailer we show that retail competition in the presence of either fixed costs or bargaining power may lead to slotting allowances in an optimal contract even with a monopoly manufacturer and no information asymmetry on the other hand slotting allowances do not arise with a monopoly retailer and no information asymmetry whether the manufacturer is a monopoly or not we also show that more intense retail competition higher retail bargaining power larger retailer fixed costs lower marginal costs of retailing as well as larger relative retailer size whether coming from a location or operating advantage have a positive impact on the incidence and the magnitude of slotting allowances the opposing effects of the fixed and marginal operating costs on slotting allowances as well as the impact of competition and bargaining power on profits underscore the importance of careful definitions of these variables in empirical research

channel pass through of trade promotions packaged goods manufacturers spend in excess of 75 billion annually on trade promotions even though their effectiveness has been hotly debated by academics and practitioners for decades one reason for this ongoing debate is that empirical research has been limited mostly to case studies managerial surveys and data from one or two supermarket chains in a single market in this paper we assemble a unique data set containing information on prices quantities and promotions throughout the entire channel in a category our study extends the empirical literature on pass through in three important ways first we investigate how pass through varies across more than 1 000 retailers in over 30 states second we study pass through at multiple levels of the distribution channel third we show how the use of accounting metrics such as average acquisition cost rather than transaction cost yields biased estimates of pass through and therefore overstates the effectiveness of trade promotions we find that mean pass through elasticities are 0 71 0 59 and 0 41 for the wholesaler retailer and total channel respectively more importantly at each level of the channel we observe large variances in pass through estimates that we explain using various measures of cost and competition surprisingly we find that market structure and competition have a relatively small impact on pass through we conclude by showing how the profitability of manufacturer and wholesaler deals can be improved by utilizing detailed effectiveness estimates for example a manufacturer using an inclusive trade promotion strategy might offer a 10 off invoice deal to all retailers on every product this strategy would decrease manufacturer and wholesaler profits for 56 of product store combinations whereas retailers experience a profit boost in 96 of cases manufacturers and wholesalers can avoid unprofitable trade deals for specific products and retailers by utilizing estimates of pass through consumer price elasticity and margins compared to the inclusive strategy such a selective trade promotion strategy would improve deal profitability by 80 and reduce costs by 40

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

the impact of technological innovation on international trade patterns the evidence reconsidered abstract this paper presents some new evidence in relation to the role of technical change in particular industrial innovation on the international competitiveness of the various oecd countries its originality consists primarily of a using a technology output indicator to measure technological performance b presenting and comparing various measures of trade and technological performance for each individual oecd country with the exception of iceland c analysing at a relatively high level of product industry disaggregation the relationship between export performance and technological performance at the same time the very limited scope of the paper has to be emphasized a the analysis is purely static all the evidence presented relates to one year 1977 b most of the results obtained are preliminary and should be further substantiated by more detailed empirical and theoretical research c as a consequence little attention has been paid to policy implications which it was felt could only be discussed properly in a later stage the paper consists of four sections a brief review of the state of the art section 1 a discussion on definitions of technology intensity section 2 the development of the best technology output indicator section 3 and the empirical analysis itself section 4 the following most important results emerge from these various sections a there are serious shortcomings in using average technology intensity as bench mark for classifying products or industries in technology intensive or nontechnology intensive categories b there is a substantial difference between technology intensity as measured on the basis of a technology input proxy rd c yet as between countries the most traditional output and input indicators the number of patents granted and the amount spent on rd d foreign patenting in particular foreign patenting in the united states figs 1 and 2 section 3 is a more reliable technology output proxy than domestic patenting e in terms of technological comparative advantage as opposed to technology intensity it is the small oecd countries as opposed to the large ones which seem to base their trade comparative advantage on technological comparative performance table 7 section 4 1 f at the individual industry level it is found that i for most technology intensive industries defined however in a less restrictive way than us r d intensities a close relation exists between technological performance and export performance and ii that as compared to other country specific resource variables technological performance is the most important trade explanatory variable its elasticity increasing with the technology intensity of industries tables 11 and 12 section 4 2 space constraints prevented us from presenting the data in relation to the inter industry and inter country analysis these can however be obtained from the author

an empirical investigation of the welfare effects of banning wholesale price discrimination rand 054 rand2007 cls 1994 07 13 v1 2u standard latex document class rand rand 054 dispatch 12 7 2008 ce n a journal msp no no of pages 26 pe sharon rand journal of economics vol 40 no 1 spring 2009 pp 20 45 an empirical investigation of the welfare effects of banning wholesale price discrimination sofia berto villas boas economic theory does not provide sharp predictions on the welfare effects of banning wholesale price discrimination if downstream cost differences exist then discrimination shifts production inefficiently toward high cost retailers so a ban increases welfare if differences in price elasticity of demand across retailers exist discrimination may increase welfare if quantity sold increases so a ban reduces welfare using retail prices and quantities of coffee brands sold by german retailers i estimate a model of demand and supply and separate cost and demand differences simulating a ban on wholesale price discrimination has positive welfare effects in this market and less if downstream cost differences shrink or with less competition introduction wholesale price discrimination means that an upstream firm sets different prices for the same product for various downstream retailers wholesale price discrimination is commonly practiced in many markets examples include markets such as petroleum distribution steel heavy trucking tobacco and pharmaceuticals in several countries milk and other dairy products are sold using government administered or sanctioned discriminatory pricing schemes wholesale price discrimination practices are also used for services such as loans insurance and advertising 1 competition authorities have been concerned with wholesale price discrimination the european union treaty s article 82 c prohibits practices where a dominant firm would place trading partners at a competitive disadvantage the u s robinson patman act forbids discriminat ing in price between different purchasers where the effect may be to lessen competition unless the university of california berkeley sberto are berkeley edu i thank the editor igal hendel and two anonymous referees for many helpful comments and max auffhammer cyndi berck peter berck gal hochman silke januszewski forbes george judge kai uwe k uhn diana lazo mark muendler aviv nevo ariel pakes jeff perloff andrew sweeting miguel villas boas and participants at uc san diego university of michigan the inra idei conference in toulouse and the university of british columbia summer conference in industrial organization for their suggestions i thank daniel klapper for letting me have access to the data support from the giannini foundation and from an aes grant are gratefully appreciated see for gasoline markets texaco v hasbrouck 496 us 543 no 87 2048 1990 and the new york state motor fuel marketing practices act for steel chan hall and rust 2003 for heavy trucking volvo trucks north america inc v reeder simco gmc inc docket no 04 905 for tobacco brooke group ltd v brown and williamson tobacco corp 509 us 209 no 92 466 1993 for wholesale pharmaceuticals see http www datcp state wi us trade business unfair comp drug price jsp for dairy markets see for example gardner 1984 and for services see givens 1983 c 2009 rand copyright

marketing production coordination in channels of distribution abstract in this paper we analyze the effects of functional horizontal decentralization by a channel member on the performance of an industrial channel of distribution we use the model of eliashberg j steinberg r 1987 management science 33 981 1000 which describes a channel of distribution consisting of a manufacturer and a value adding distributor we allow the distributor to decentralize decision making between his marketing and production functions our results show that functional decentralization at the distributor level increases the price sensitivity of the distributor concerning the price he faces from the manufacturer causes a shift in the distributor s demand curve increases the distributor s inventory activities in terms of both quantity and time frame and under certain conditions increases the manufacturer s inventory as expected the decentralized distributor has a less coordinated pricing policy vis a vis the production policy using numerical means we show that functional decentralization can improve the overall channel profitability i e for both manufacturer and distributor this counter intuitive result suggests that in our non repeated perfect information game setting functional decentralization can yield a pareto dominant equilibrium outcome where both the distributor and manufacturer are better off even though it is only the distributor who is changing his organizational decision making

reply to managing channel profits comment we welcome moorthy s comment moorthy k s 1987 managing channel profits comment marketing sci 6 fall 375 379 it provides an opportunity to clarify several issues raised in our 1983 paper that paper was motivated by one concern channel coordination we believed that channel members benefit from coordination and that many institutional arrangements such as quantity discounts are actually coordinating mechanisms we developed a simple model to demonstrate our belief for historical accuracy mcguire and staelin cited by moorthy had already independently developed a useful model of duopolistic channel competition being unaware of their working paper our model not surprisingly differed from theirs both papers provide important but different insights into channel management

divisionalization and strategic managerial incentives in oligopoly under uncertainty abstract this paper argues that divisionalization and incentive contracting are complementary rent shifting tools in the presence of demand uncertainty the role for divisionalization arises if managers know the state of demand prior to making output decisions and if incentive contracts are linear and non state contingent in this context incentive contracts achieve expected stackelberg outcomes but have no impact on the firm s responsiveness to demand shocks divisionalization on the other hand has the strategically beneficial effect of making the firm more responsive to demand shocks

interactions between members of a marketing production channel under seasonal demand abstract key decisions in a marketing production channel faced with a seasonal demand include production and pricing decisions for the manufacturer and processing and pricing decisions for the retailer in such situations a variety of contracts are possible including contracts under which the manufacturer charges a constant price throughout the season or the retailer processes at a constant rate throughout the season also possible are channel structures in which the manufacturer and retailer cooperate to make decisions jointly the main objective of the present paper is to compare optimal policies under all the situations described above we show that having a constant manufacturer s price or a constant processing rate does not have a significant impact upon the retailer s price or inventory decisions however if the demand is not highly seasonal a constant processing rate contract will result in higher production and processing rates and a lower manufacturer s price compared to a constant manufacturer s price contract also a centralized channel involving joint decision making will lead to a lower price at the retail level and higher production and processing rates hence issues such as channel coordination and contracts between manufacturers and retailers which have received significant attention in the marketing literature have implications for the production area as well

competition and cooperation in marketing channel choice theory and application this paper discusses the problem of choosing a vertical marketing channel in a product differentiated duopolistic market firms choose product price and the form of the marketing channel to maximize profits it is shown that integration of the marketing function results in greater price competition and lower prices than does the use of independent marketing middlemen the profitability of reducing price competition by using such middlemen is investigated two hypotheses that integration is negatively associated with the products substitutability and that symmetric channel structures are stable are tested in a preliminary way and supported with survey data from the international semiconductor industry

research note the role of production lead time and demand uncertainty in marketing durable goods firms often have to make their production decisions under conditions of demand uncertainty this is especially true for product categories such as automobiles and technology goods where the lead time needed for manufacturing forces firms to make production decisions well in advance of the selling season once the firm has produced the goods the available production volume affects the firm s subsequent marketing decisions in this paper we study the relationship between the firm s production and marketing decisions for a durable goods manufacturer we develop a dynamic model of a durable product market in which the demand functions are developed from a micromodeling of consumer utility functions and an equilibrium analysis of consumer strategies after taking into account the demand uncertainty as well as the potential for cannibalization of future sales the manufacturer makes its production and sales decisions we find that the firm s optimal inventory level is u shaped in the durability of the product and that the firm suffers a larger loss due to uncertainty when it is leases rather than sells its products furthermore unlike the case for nondurables for durable goods we find that the effect of uncertainty persists even after the uncertainty has been resolved

on the best use of trade controls in the presence of foreign market power this paper derives optimum tariffs for a country whose trading partner always exploits its own market power but assumes naively that the home country will leave its restriction unchanged it then shows that a country which is a monopolist or monopsonist will always prefer its best price limit price floor or ceiling to its best tariff and prefer free trade to any quota however a duopsonist or duopolist will prefer its best quota to its best tariff and free trade to any price limit finally the best import or export tariff of a country which fears retaliation may be negative