vertical control of price and inventory this paper offers a simple approach to the theory of decentralizing inventory and pricing decisions along a supply chain we consider an upstream manufacturer selling to two outlets which compete as differentiated duopolists and face uncertain demand demand spillovers between the outlets arise in the event of stockouts the price mechanism in which each outlet pays a two part price and chooses price and inventory virtually never coordinates incentives efficiently contracts that can elicit first best decisions include resale price floors or buy back policies retailer held options to sell inventory back to the manufacturers

resale price maintenance in an oligopoly with uncertain demand abstract this paper considers a model where oligopolistic manufacturers sell to consumers through competitive retailers who face demand uncertainty the setup is a symmetric duopoly with product differentiation and a perfectly competitive retail market in the game with unconstrained price competition there is price dispersion in the retail market in the game with resale price maintenance rpm manufacturers profits are higher retail inventories are at least as high and total surplus is at least as high the effect of rpm on consumer surplus is ambiguous rpm also precludes possible coordination failure between the manufacturers

duopolistic vertical restraints abstract in an industry where competition exists at the wholesale level vertical restraints are not necessarily desirable from the standpoint of the manufacturers when vertical restraints are employed it is never in the form of retail price maintenance but rather in the form of franchise fee pricing when the products produced by the manufacturers are only slightly differentiated the producers may benefit from the double marginalization that arises with linear pricing such double marginalization results in higher retail prices which relieve competitive pressures

raising retailers profits on vertical practices and the exclusion of rivals resale price maintenance rpm slotting fees loyalty rebates and other related vertical practices can allow an incumbent manufacturer to transfer profits to retailers if these retailers were to accommodate entry upstream competition could lead to lower industry profits and the breakdown of these profit transfers thus in equilibrium retailers can internalize the effect of accommodating entry on the incumbent s profits consequently if entry requires downstream accommodation entry can be deterred we discuss policy implications of this aspect of vertical contracting practices jel l14 l22 l25 l42 l81 this paper considers the upstream exclusionary effect of vertical practices that create rents for downstream retailers without carrying a contractual obligation for exclusivity 1 examples of interest include allowing the manufacturer to set the price at which a retailer sells to consumers resale price maintenance or rpm periodic lump sum payments to retailers through slotting fees or loyalty rebates and mar ket division schemes such as the allocation of clients to specific retailers or the use of exclusive territories we explore equilibria that can arise when an upstream incumbent uses a vertical practice of the sort outlined above to share industry profits with retailers we show that if entry by another upstream manufacturer leads to competition that reduces industry profits sufficiently and entry requires accommodation by retailers then equilibria exist in which retailers do not accommodate the entrant this results in exclusion in essence the vertical practice creates a quasi rent that retailers in equilibrium have an incentive to protect

the sustainable supply chain network competition with environmental tax policies abstract this paper captures different environmental tax policies in a multi tiered supply chain network competition context we derive the governing equilibrium conditions for the noncooperative game theory models for each firm and provide the equivalent variational inequality formulations the numerical examples investigate the impacts of emission tax policies and product differentiation on the competing firms and compare the effects of different environmental policies flat emission tax rates progressive emission taxes and the government command and control regulations with emission standards on equilibrium product demands prices total emissions and overall profits the computational results indicate that the implementation of environmental tax policies along with an increase in consumers environmental concerns can not only motivate the firms to perform sustainable operations but also reduce the total carbon footprint furthermore the low cost progressive emission tax policies can be as effective as the high flat emission tax rate in terms of reduction in carbon footprint therefore the model developed in this paper can be used by the policymakers and the firms to evaluate the effects of different environmental tax policies in a supply chain competition context

capacity investment under postponement strategies market competition and demand uncertainty we consider duopoly models where firms make decisions on capacity production and price under demand uncertainty capacity and price decisions are made respectively ex ante and ex post demand realizations the interplay between the timings of demand realization and production decision endows firms with different capabilities flexible firms can postpone production decisions until the actual demand curve is observed but inflexible firms cannot under general demand structures and cost functions we characterize the equilibrium for a symmetric duopoly and establish the strategic equivalence of price and quantity competitions when firms are flexible we investigate the stochastic order properties of capacity and profit and show that they both increase for a flexible firm when the market is more volatile we find that flexibility allows a firm to increase investment in capacity and earn a higher profit while benefiting customers by keeping the price in a narrower range strategic equivalence implies that

returns system with rebates we consider a variant of the newsvendor problem atomistic retailers each buy merchandise from a monopoly supplier for resale at a market determined common retail price that depends upon the total industry order quantity and upon a stochastic demand after the orders are filled the supplier learns the realization of demand but the retailers do not we show that in this setting a returns system with rebates with previously set buy back price for returns and ex post payments from the supplier to each retailer per unit actually sold implements the optimal production and sales strategy attaining maximum expected profit in the channel

local enforcement and better forests summary current studies of local resource management examine many factors thought to be associated with good resource conditions despite the number of studies and the importance of such resources to millions of people worldwide a lack of theory and hypothesis testing beyond the case level limits the lessons empirical studies offer we argue that regular monitoring and sanctioning of rules rule enforcement is a necessary condition for successful resource management we test our theory using data regarding 178 user groups and by pairing rule enforcement with other important factors social capital formal organization and dependence on forest products

distribution contracts to support optimal inventory holdings under demand uncertainty abstract when suppliers produce products for which demand is uncertain they face a problem of inducing downstream distributors to stock inventory levels that the suppliers prefer this paper considers a wide array of alternative supply contracts each of which consists of a mixture of constant per unit wholesale prices buy back arrangements and post sale payments contingent on sales made such as revenue sharing or buybacks we show that linear supply contracts specifying any combination of two of these three instruments can implement the vertical integrated outcome for a monopoly thereby generating the supplier s preferred inventory configuration and price distribution we extend our results to differentiated product oligopoly demonstrating that each supplier obtains its preferred inventory configuration and price distribution given the choices of its rival distributors choose optimal inventories from the suppliers standpoint even if suppliers do not know the distribution of demand uncertainty and given the perfect competition among distributors all profits in the supply chain are captured by suppliers thus suppliers are able to deal with demand uncertainty with remarkably little information about demand and without the need to control dealer actions in detail in particular suppliers need not specify either dealer inventories or resale prices but instead encourage distributors to order based on information in their possession and to set prices that generate desirable resale price dispersion

multi period modeling of two way price commitment under price dependent demand abstract this paper examines the use of price commitment policies in dynamic contracting in multiple period finite time horizons two specific forms of price commitment are considered one on the part of the retailer through a retail fixed markup contract and one on the part of the manufacturer through a price protection contract optimal policies for each form of price commitment are analytically derived as are optimal policies for the traditional price only and centralized supply chain scenarios that we use as comparisons we prove that optimal retail price and order size solutions exist in each period under the assumption of non increasing price dependent demand we show that the existence of retailer inventory between periods causes the optimal policies to differ from a static single period model further we show that a supplier offers a price protection policy as a signal to the retailer to resolve the gaming that naturally occurs under price only this effectively decouples the multi period dynamic contracting setting into repeated single period scenarios however the resulting behavior can actually inhibit supply chain performance on the retail commitment side we find that retail fixed markup policies are quite effective in improving supply chain efficiency we show that such policies can lead to pareto improvement over price only contracts and can even coordinate the supply chain in some situations

carbon emissions and energy effects on a two level manufacturer retailer closed loop supply chain model with remanufacturing subject to different coordination mechanisms abstract this paper presents two models classical and vmi cs coordination for a two level closed loop supply chain with a manufacturer and a retailer with a facility to remanufacture used items the paper considers three critical environmental issues which are the energy used in production manufacturing and remanufacturing processes ghg emissions from production and transportation activities subject to a penalty tax and the number of times to remanufacture recover a used item numerical results show that the traditional optimization approach which minimises the sum of inventory related costs suggested less remanufacturing fewer recovery times and more ghg emissions and energy usage a result of operating at high production rates the vmi cs model was shown to be more economical than the classical model for a wide range of manufacturing rates but not necessarily a more environmentally responsible choice an extensive numerical analysis was conducted to enrich the discussion and to draw some managerial insights on how to make environmentally conscious decisions

on the dampening of competition effect of exclusive dealing the authors compare and contrast the profit and welfare effects of exclusive dealing sales through a common retailer and vertical integration as did y j lin 1990 the authors find that imperfectly competitive manufacturers prefer to impose exclusive dealing on their retailers unlike lin the authors find that welfare is higher under exclusive dealing than when products are sold through a common retailer this finding suggests a new interpretation of the standard stations v united states 1949 antitrust case copyright 1993 by blackwell publishing ltd

private property and economic efficiency a study of a common pool resource abstract the british columbia halibut fishery provides a natural experiment of the effects of privatizing the commons using firm level data from the fishery 2 years before private harvesting rights were introduced the year they were implemented and 3 years afterward a stochastic frontier is estimated to test for changes in technical allocative and economic efficiency the study indicates that 1 the short run efficiency gains from privatization may take several years to materialize and can be compromised by restrictions on transferability duration and divisibility of the property right 2 substantial long run gains in efficiency can be jeopardized by preexisting regulations and the bundling of the property right to the capital stock and 3 the gains from privatization are not just in terms of cost efficiency but include important benefits in revenue and product form

surplus maximization and optimality i identify assumptions under which policies that maximize expected surplus are pareto optimal even when expected consumer surplus does not even locally represent preferences over price income lotteries besides the oft made partial equilibrium assumptions that only one price varies and that income changes do not aect demand the two other assumptions are that every consumer s indirect utility function is supermodular in price and income and policies order prices by a single crossing property supermodularity holds precisely if relative risk aversion exceeds the income elasticity of demand a mild condition the single crossing property appears strong but holds in many applications that use expected surplus

vertical control and price versus nonprice competition this paper considers a manufacturer distributing a product through retailers who compete in price and service which reduces the time it takes to purchase a good the mix of these instruments that maximizes collective profit is determined by the tastes of consumers on the product margin whereas decentralized retailers consider as well the tastes of consumers on the interretailer margins given search or travel costs consumers with low time costs are overrepresented on the interretailer margins in considering customers on the wrong margin retailers are therefore biased toward price competition this distortion that can be corrected with vertical restraints

the role of revenue sharing and first mover advantage in emission abatement with carbon tax and consumer environmental awareness abstract in this study we explore the role of revenue sharing and first mover advantage in manufacturer s carbon emission abatement effort and the firms profitability in a linear demand setting where the government might impose some carbon emission charges and consumers may have environmental awareness we consider a supply chain system consisting of a manufacturer and a retailer either of them can move first to offer the other firm a wholesale price contract wp or a revenue sharing contract rs which is termed as abatement level promise strategy pr and abatement level requirement strategy rq respectively our analysis shows that under both pr and rq there exists a unique abatement level maximizing the manufacturer s profit in wp and rs respectively moreover both firms incentives for abatement are perfectly aligned under pr but are misaligned under rq when the marginal abatement cost is large contrary to conventional wisdom rs does not necessarily dull the manufacturer s effort in abatement it depends on whether she possesses first mover advantage and whether consumers have environmental awareness further with consumer environmental awareness numerically or without both firms always prefer to possess first mover advantage but the system s profit under rq is smaller than that under pr numerically surprisingly whether a greater share of revenue benefits a firm depending on whether the firm possesses first mover advantage numerically finally under both rq numerically and pr rs fails to coordinate the system

resale price maintenance and interlocking relationships dampening of interbrand as well intrabrand competition is often advanced to justify per se illegality of rpm we analyze this argument in a context where rival manufacturers distribute their products through the same competing retailers we show that rpm indeed limits the exercise of competition at both levels and can generate industry wide monopoly pricing the impact on prices depends on the extent of potential competition at either level as well as on the parties influence in determining the terms of the contracts our analysis sheds a new light on ongoing legal developments and is supported by recent empirical studies

the effects of advertising on resale price maintenance this research combines the market power and market competition perspectives on advertising under the framework of a generalized theoretical model in minimum resale price maintenance rpm in order to investigate the effects of advertising on rpm using the real options approach the effects of advertising on retail price will impact the value of rpm further influence the incentive of manufacturers to impose rpm through brand penetration and promotional pricing effects advertising is likely to influence rpm under the condition of retail price competition when the brand penetration effect is dominant advertising will discourage manufacturers from imposing rpm advertising will encourage manufacturers to impose rpm when the promotional pricing effect is dominant rpm not only substitutes advertising but also complements advertising

demand uncertainty inventories and resale price maintenance we show that a manufacturer facing uncertain demand and selling through a competitive retail market may wish to support adequate retail inventories by preventing the emergence of discount retailers in our model discounters offer low prices made possible by low probability of being saddled with unsold inventories in the event of slack demand full price retailers are compensated for a higher probability of unsold inventories by a higher retail price when they sell we show that preventing discounting increases the manufacturer s wholesale demand and profits and we delineate demand conditions under which equilibrium inventory holding and consumer welfare increase

paying for pollution permits and charges tradeable emission permits are becoming an increasingly important instrument for controlling emissions for a variety of reasons emission permits are often allocated gratis conferring a windfall gain on the first generation of permit holders this paper examines how a regulator may capture this rent four different methods of rent capture profit output and input charges and an emission permit rental charge are compared with respect to their effects on efficiency and the relative burden placed on cleaner and dirtier firms in addition to generating revenue for the regulator certain charges coupled with emission permits may result in a better instrument than permits alone

vertical restraints and producers competition this paper examines the rationale for vertical restraints it shows that there are important circumstances under which these restrictions have significant anti competitive effects the paper focuses on the consequences of exclusive territorial arrangements among the retailers of two products which are imperfect substitutes such arrangements are shown to increase consumer prices under plausible conditions the increase in consumer prices is sufficiently large to more than offset the deleterious effects from double marginalization resulting from reduced competition among retailers the imposition of exclusivity provisions is may be part of a nash equilibrium among producers these results hold whether there are or are not franchise fees this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

property rights in uk uplands and the implications for policy and management abstract rural areas are subject to changing and often competing demands where agricultural production was once paramount it now competes with other ecosystem services such as carbon storage rural amenity and wildlife habitat if rural areas are to be managed to produce this broad range of goods and services then more diverse and complex management regimes are needed this paper explores the literature on property rights before using a property rights bundle approach in the uk uplands to 1 examine the distribution of property rights between stakeholders in a multi resource system and 2 evaluate the effect of state intervention on the redistribution of property rights and the resulting management regimes private land owners were found to be the dominant type of property rights holder and private property the dominant management regime in the uplands of the uk government intervention has also created private state regimes for some public goods such as biodiversity but common property management is still in its infancy with regards to ecosystem services and few stakeholders have claimant rights over resources as a result many stakeholders are unable to influence management to produce the goods that they want a property rights perspective highlights that single management regimes alone are unlikely to manage land sustainably for both private and public goods instead a complex mix of private private state and common property regimes are found to be emerging in this multi resource system these mixed management regimes have the potential to produce sustainable outcomes but only if the appropriate management regime is matched to each resource if links are developed between each regime to deal with conflict and if mixed management is adaptable enough to cope with new and changing demands

resale price maintenance and spatial price discrimination abstract in this article we examine resale price maintenance rpm in a classic model of downstream retailers engaging in spatial price discrimination we show that a resale price floor increases the total profit of the upstream monopoly when transport cost product differentiation is relatively low importantly this profitable rpm floor can also enhance social welfare and even consumer surplus a resale price ceiling can also be profitable and always improves consumer surplus and social welfare we argue that such findings support a rule of reason approach to rpm

controlling opportunism in vertical contracting when production precedes sales in a make to stock vertical contracting setting with private contracts when retailers do not observe each other s stocks before choosing their prices an opportunism problem always exist in contract equilibria but public market wide resale price maintenance rpm can restore monopoly power however other widely used tools which do not fall under antitrust scrutiny and require only private bilateral contracts such as buyback contracts also allow the producer to fully exercise his monopoly power we conclude that a more lenient policy toward rpm is unlikely to affect the producer s ability to control opportunism

making the commons work conservation and cooperation in ireland commonage represents land held under common property that incorporates a system of local cooperative arrangements and rules to conserve and manage the irish uplands we analyze the institutional and economic factors that influence the behavior of commonage farmers under a common property regime using a recursive bivariate probit model results show that 1 cooperation has a positive and important impact on commonage conservation 2 agricultural policies by way of livestock premia increase the level of degradation while 3 farm financial support through agrienvironment measures positively affects commonage conservation and encourages cooperation between farmers

the market for sulfur dioxide emissions the 1990 clean air act amendments initiated the first large scale use of the tradable permit approach to pollution control the theoretical case for this approach rests on the assumption of an efficient market for emission rights the authors empirical analysis shows that the emission rights market created by the 1990 amendments had become reasonably efficient by mid 1994 they also show that the auctions specified in the amendments to jump start trading had become a small part of the overall market finally the authors demonstrate that the strategic bidding behavior discussed in the literature has had no effect on market prices copyright 1998 by american economic association

entitlements missing markets and environmental uncertainty reply abstract at one level dore and ward seem intent on immunizing received doctrine they say that i did not prove that rights violated nozick s principles of justice and that i did not prove that missing markets were the problem more telling they allege i did not prove that my story was better than the particular story favored by dore and ward that is they argue that there is an alternative approach based on the theory of public economics which is indeed operational 3 they then use the bulk of their comment to explain and defend this alternative model they hope to convince the reader that the model of public economics survives intact in the face of my alternative model to the extent that their model allows one to define the problem away it is not difficult to see why they find it so compelling more seriously dore and ward fail to make a coherent argument about the concept of rights and duties and the logic of a particular rights structure that happens to prevail they seem concerned that my article was tampering with some sacred social construct the status quo rights structure and that my article threatened the received wisdom of both public economics and paretian walrasian bliss indeed theirs seems to be a genuine fear that if economists release their grip on the certitude of received orthodoxy the floodgates will be open to all manner of bumbling regulators seeking to shift rights and wealth positions across generations my article is apparently threatening because it seems to suggest that the received wisdom may at times be misleading

how many parts to make at once reprinted from factory the magazine of management volume 10 number 2 february 1913 pp 135 136 152 interest on capital tied up in wages material and overhead sets a maximum limit to the quantity of parts which can be profitably manufactured at one time set up costs on the job fix the minimum experience has shown one manager a way to determine the economical size of lots

the strategic perils of delayed differentiation the value of delayed differentiation also known as postponement for a monopolist has been extensively studied in the operations literature we analyze the case of imperfectly competitive markets with demand uncertainty wherein the choice of supply chain configuration i e early or delayed differentiation is endogenous to the competing firms we characterize firms choices in equilibrium and analyze the effects of these choices on quantities sold profits consumer surplus and welfare we demonstrate that purely strategic considerations not previously identified in the literature play a pivotal role in determining the value of delayed differentiation in the face of either entry threats or competition these strategic effects can significantly diminish the value of delayed differentiation in fact under plausible conditions these effects dominate the traditional risk pooling benefits associated with delayed differentiation in which case early differentiation is the dominant strategy for firms even under cost parity with delayed differentiation we extend the main model to study the effects of alternate market structures asymmetric markets and inventory holdback our results in particular that for a broad range of parameter values early differentiation is a dominant strategy even under cost parity with delayed differentiation are robust to these relaxations

demand uncertainty and price maintenance markdowns as destructive competition this paper offers a new theory of destructive competition the authors compare minimum resale price maintenance to retail market clearing in a model with a monopolistic manufacturer selling to competitive retailers in both the resale price maintenance and flexible price games retailers must order inventories before the realization of demand uncertainty the authors find that manufacturer profits and equilibrium inventories are higher under resale price maintenance than under market clearing surprisingly consumer surplus can also be higher in which case unfettered retail competition can legitimately be called destructive copyright 1997 by american economic association

a century of evolution from harris s basic lot size model survey and research agenda abstract determining the economic lot size has always represented one of the most important issues in production planning this problem has long attracted the attention of researchers and several models have been developed to meet requirements at minimum cost in this paper we explore and discuss the evolution of these models during one hundred years of history starting from the basic model developed by harris in 1913 up to today following harris s work a number of researchers have devised extensions that incorporate additional considerations the evolution of eoq theory strongly reflects the development of industrial systems over the past century here we outline all the research areas faced in the past by conducting a holistic analysis of 219 selected journal papers and trying to give a comprehensive view of past work on the eoq problem finally a new research agenda is proposed and discussed

vertical price controls with uncertain demand a manufacturer distributes output before knowing demand and thus risks making more than its rivalrous independent retailers can sell at the monopoly price if demand is low retailers may therefore resell more than the joint profit maximizing output anticipating this they will not pay as much for the merchandise ex ante as they would if the manufacturer could commit to preventing rivalry the manufacturer has many options including vertical integration chain outlets restricted output buy backs just in time deliveries and minimum resale prices the article discusses each option s advantages and disadvantages and concludes that all roads lead to resale price maintenance the article closes with an alternative to the dealercartel hypothesis for minimum resale prices

resale price maintenance and forward integration into a monopolistically competitive industry in this paper we adopt the ces model of product differentiation for the downstream stage of the industry with an upstream monopolist we first show that resale price maintenance is equivalent to forward integration and that both increase profits then we demonstrate that forward integration by an upstream monopolist will reduce welfare for the industry prices fall with forward integration but the integrating firm contracts the number of downstream subsidiaries so drastically that the reduced diversity more than offsets the gains from lower prices

why parallel trade may raise producers profits abstract this paper shows that a manufacturer may benefit from parallel trade in addition to an intuitive condition about the effect of demand shocks this occurs when competitive retailers must order inventories before they know the realization of demand and for products whose sale value drops at the end of the demand period for these types of products letting retailers trade unsold inventories generally results in larger orders placed with the manufacturer and higher manufacturer profit the model provides a simple explanation as to why the volume of parallel trade is now very large and accepted by manufacturers for some products such as automobiles clothes toys consumer electronics musical recordings cosmetics and perfumes

a stochastic and asymmetric information framework for a dominant manufacturer supply chain abstract consider a dominant manufacturer wholesaling a product to a retailer who in turn retails it to the consumers at p unit the retail market demand volume varies with p according to a given demand curve this basic system is commonly modeled as a manufacturer stackelberg ms game under a deterministic and symmetric information det sym i framework we first explain the logical flaws of this framework which are i the dominant manufacturer leader will have a lower profit than the retailer under an iso elastic demand curve ii in some situations the system s correct solution can be hyper sensitive to minute changes in the demand curve iii applying volume discounting while keeping the original ms profit maximizing objective leads to an implausible degenerate solution in which the manufacturer has dictatorial power over the channel we then present an extension of the stochastic and asymmetric information sto asy i framework proposed in lau and lau lau a lau h s 2005 some two echelon supply chain games improving from deterministic symmetric information to stochastic asymmetric information models european journal of operational research 161 1 203 223 coupled with the notion that a profit maximizing dominant manufacturer may implement not only ms but also pm i e using a manufacturer imposed maximum retail price we show that this new framework resolves all the logical flaws stated above along the way we also present a procedure for the dominant manufacturer to design a profit maximizing volume discount scheme using stochastic and asymmetric demand information using our sto asy i framework to resolve the logical flaws of the det sym i framework also reveals two noteworthy points i the attractiveness of the perfectly legal but overlooked channel coordination mechanism pm and ii volume discounting as a means for the dominant manufacturer to benefit from information known only to the retailer

collective action for local commons management in rural yunnan china empirical evidence and hypotheses using evolutionary game theory this paper presents hypotheses regarding collective actions for irrigation management with the help of evolutionary game theory data for the analysis were collected by the author from the irrigation system of rural yunnan china an econometric analysis reveals that collective action will be forthcoming in rural communities where few nonfarm job opportunities are provided the degree of income disparity is quite small and resource restrictions are moderately problematic the finding that communities without local government intervention outperform those with intervention supports the proverbial view that external agencies should delegate significant parts of the control rights of common pool resources to immediate stakeholders

property rights regimes and natural resources a conceptual analysis the term common property resource is an example of a term repeatedly used to refer to property owned by a government or by no one it is also used for property owned by a community of resource users such usage leads to confusion in scientific study and policy analysis in this paper we develop a conceptual schema for arraying property rights regimes that distinguishes among diverse bundles of rights ranging from authorized user to claimant to proprietor and to owner we apply this conceptual schema to analyze findings from a variety of empirical settings including the maine lobster industry

strategic technology choice and capacity investment under demand uncertainty this paper studies the impact of competition on a firm s choice of technology product flexible or product dedicated and capacity investment decisions specifically we model two firms competing with each other in two markets characterized by price dependent and uncertain demand the firms make three decisions in the following sequence choice of technology technology game capacity investment capacity game and production quantities production game the technology and capacity games occur while the demand curve is still uncertain and the production game is postponed until after the demand curve is revealed we develop best response functions for each firm in the technology game and compare how a monopolist and a duopolist respond to a given flexibility premium we show that the firms may respond to competition by adopting a technology which is the same as or different from what the competitor adopts we conclude that contrary to popular belief flexibility is not always the best response to competition flexible and dedicated technologies may coexist in equilibrium we demonstrate that as the difference between the two market sizes increases a duopolist is willing to pay less for flexible technology whereas the decision of a monopolist is not affected further we find that a firm that invests in flexibility benefits from a low correlation between demands for two products but the extent of this benefit differs depending on the competitor s technology choice our results indicate that higher demand substitution may or may not promote the adoption of flexibility under competition whereas it always facilitates the adoption of flexibility without competition finally we show that contrary to intuition as the competitor s cost of capacity increases the premium a flexible firm is willing to pay for flexibility decreases

dedicated vs product flexible production technology strategic capacity investment choice this paper studies the optimal investment strategies of an incumbent and a potential entrant that can both choose between a product flexible and dedicated technology in a two product market characterized by uncertain demand the product flexible production technology has certain advantages especially when the economic environment is uncertain on the other hand the dedicated production technology allows a firm to commit to production quantities this gives strategic advantages which can outweigh the value of flexibility it turns out that both firms prefer for some scenarios the dedicated production technology however we find that in a game with sequential technology choices both firms investing dedicated will not be an equilibrium especially when the economic environment is more uncertain the incumbent overinvests in product flexible capacity to force the entrant to choose the dedicated technology then the incumbent is the only firm with the product flexible production technology which results in a high payoff

environmentally responsible inventory models non classical models for a non classical era abstract mathematical models of inventory typically include the three inventory associated costs of surplus shortage and ordering these classic inventory models are then analysed so as to choose inventory parameters that usually minimise the total cost of operating the inventory system being investigated unfortunately classic inventory models do not provide a meaningful basis for analysing many real and increasingly important practical inventory problems and situations it is therefore not surprising that over recent years several authors have discussed these issues in broad terms and suggested that a new paradigm needs to be developed this paper develops some specific aspects of this discussion in particular the paper identifies a range of inventory problems that are not covered appropriately by traditional inventory analysis one of these is to design responsible inventory systems i e systems that reflect the needs of the environment the paper then examines the importance of inventory planning to the environment in greater detail for example packaging is important not only because of its costs and the protection that it provides to the inventory items but also because of its eventual effects on the environment in terms of the use of resources and potential landfill for similar reasons waste which can result from poor inventory management is highly important the location of stores is important because location affects transport costs thus the influence of the secondary aspects of most inventory models packaging waste and location are important but even more important are the inter relations with the total system in particular the location of the manufacturing plants and the effect that inventory planning has on the logistics chain potentially have considerable environmental implications inventory is part of a wider system however until the cost charged for an activity reflects the true environmental cost of that activity it is likely that decisions will be made on the basis of erroneous data in that situation we are faced with either determining the environmental cost of specific actions or to use environmental costs that are somewhat contrived in which case it may be more sensible to use very different performance measures and models the paper discusses these ideas and ways in which inventory policies may reassure us with our environmental concerns

reply to do returns policies intensify retail competition returns policies are common in many sectors of retail distribution padmanabhan and png 1997 showed that with demand uncertainty a returns policy could improve manufacturer profitability under certain conditions wang 2004 showed that returns policies do not change manufacturer profitability when demand is certain and retailing is competitive we show that returns policies do increase manufacturer profitability by attenuating retailer price competition when demand is low and intensifying competition when demand is high importantly this effect holds only in the presence of demand uncertainty further the conditions under which a returns policy raises the manufacturer s profit are weaker when retailing is a duopoly than when retailing is a monopoly this suggests that returns policies serve both to manage competition and mitigate demand uncertainty

how to escape a declining market capacity investment or exit this paper considers a firm that faces a declining profit stream for its established product the firm has the option to invest in a new technology with which it can produce an innovative product while having the option to exit at any point in time in the presence of an exit option earlier work determined the optimal timing to invest where it was shown that higher uncertainty might accelerate investment timing in the present paper the firm also decides on capacity this extension leads to monotonicity i e higher uncertainty delays investment timing we also find that higher potential profitability of the innovative product market increases the incentive to invest earlier where however we get the counterintuitive result that the firm invests in smaller capacity finally if quantity has a smaller negative effect on price the firm wants to acquire a larger capacity at a lower investment threshold

the management of common property resources collective action as an alternative to privatisation or state regulation can locally based collective action be a viable way to manage common property resources many writers on collective action and common property are sweepingly pessimistic about the ability of the people who face problems of common property to organize sustainable patterns of use for themselves this paper shows with reference to prisoners dilemma garett hardin s tragedy of the commons and mancur olson s logic of collective action that the analytical basis for this pessimism is weak in many situations of village based common property resource use there can thus be no general presumption that the collective action route to common property resource management will fail any more than there can be a general presumption that it will work the paper suggests a number of general factors to do with the characteristics of the resources the user group and group state relations on which chances of success depend

marginal cost pricing when spot markets are complete the standard formulation of a spot market subject to uncertain excess demand uses a tatonnement process that restricts trade until the market clearing price is found here i present a model in which there is no restriction on trade during the process of the resolution of uncertainty about aggregate excess demand the idea is to enlarge the commodity space and define goods by the probability that they will sell in addition to other characteristics the probability of sale characteristic is the spot market analogue of the contingencies under which delivery will take place in the arrow debreu model a failure to distinguish goods by the probability of sale characteristic can lead to the rejection of the competitive paradigm even when everyone is a price taker and the allocation is efficient

equilibrium price dispersion under demand uncertainty the roles of costly capacity and market structure when capacity is costly and prices are set in advance firms facing uncertain demand will sell output at multiple prices and limit the quantity available at each price i show that the optimal price strategy of a monopolist and the unique pure strategy nash equilibria of oligopolists both exhibit intrafirm price dispersion moreover as the market becomes more competitive prices become more dispersed a pattern documented in the airline industry while generating similar predictions the model differs from the revenue management literature because it disregards market segmentation and fare restrictions that screen customers

the joint economic lot size problem a review abstract this article reviews lot size models which focus on coordinated inventory replenishment decisions between buyer and vendor and their impact on the performance of the supply chain these so called joint economic lot size jels models determine order production and shipment quantities from the perspective of the supply chain with the objective of minimizing total system costs this paper first describes the problem studied introduces the methodology of the review and presents a descriptive analysis of the selected papers subsequently papers are categorized and analyzed with respect to their contribution to the coordination of different echelons in the supply chain finally the review highlights gaps in the existing literature and suggests interesting areas for future research

an economic theory of vertical restraints vertical restraints imposed by manufacturers on the prices locations and sales of retail firms represent a puzzling departure from the simple price mediated exchange of conventional markets in this article we analyze the theoretical basis for these restraints in a setting where retailers inform consumers and are imperfectly competitive and where a manufacturer has some monopoly power we identify three potential externalities affecting retailers decisions these externalities lead to the failure of simple uniform price contracts to coordinate the incentives of retailers with the objective of maximizing combined manufacturer and retailer profits we identify the packages of vertical restraints that are minimally sufficient under various conditions to neutralize the externalities and to achieve the joint profit maximum

the rigidity of prices this paper uses evidence on individual transaction prices to analyze price behavior the evidence shows that for many transactions pricesremain rigid for periods exceeding one year the rigidity of price ispositively correlated with industry concentration for several productsthe correlation of price changes across buyers is low the paper alsoinvestigates the relationship between price rigidity price change andthe length of time a buyer and seller have been doing business together the author interprets the evidence as emphasizing the importance of nonprice rationing and the inadequacy of models in whichprice movements alone clear markets copyright 1986 by american economic association

governance of the commons a role for the state the paper examines property regimes and common pool resources using examples and case studies the relative merits of private community and state based rights are detailed the insights from the case studies and an analysis of institution costs provide a tentative framework for understanding the role of the state in the governance of the commons

entry deterrence by timing rather than overinvestment in a strategic real options framework this paper examines a dynamic incumbent entrant framework with stochastic evolution of the inverse demand in which both the optimal timing of the investments and the capacity choices are explicitly considered we find that the incumbent invests earlier than the entrant and that entry deterrence is achieved through timing rather than through overinvestment this is because the incumbent invests earlier and in a smaller amount compared to a scenario without potential entry if on the other hand the size of the investment is exogenously given the investment order changes and the entrant invests before the incumbent does

governing snowmobilers in multiple use landscapes swedish and maine usa cases snowmobiling growth in north america and sweden creates challenges in governing the commons snowmobiling contributes to the economy of distressed rural regions and enhances residents quality of life but quasi open access to winter landscapes also breeds conflicts among snowmobilers with landowners with other recreationists and with environmentalists and ecosystem health common pool resource and impure public goods theories are used to interpret these conflicts and strategic interactions case studies in sweden and maine yield insights about conditions for sustainable management of multiple use landscapes when property rights are complex and stakeholders diverse the case studies utilize key informant interviews tourist surveys and a contingent valuation exercise to illustrate how innovative governance institutions complemented by infrastructure investments can mitigate conflicts re align incentives and internalize costs local self governance has evolved with state facilitation but without changes in fundamental property law three keys are trail agreements between snowmobile clubs and landowners clubs norm formation and rule enforcement and public private investment in quality trails these arrangements are strained by hot spot congestion free riding and unresolved conflicts with other recreationists d 2004 elsevier b v all rights reserved

effects of sourcing structure on performance in a multiple product assemble to order supply chain abstract this paper addresses the strategic pricing decisions of a decentralized assemble to order system and the effects of sourcing structure on system performance we consider an assemble to order system consisting of two substitute products and three components manufactured by different suppliers demand for the products is price sensitive the selling prices for the products are jointly determined by firms in the system we study the system under both centralized and decentralized decision making situations for the centralized system we demonstrate that there exists a unique optimal pricing solution for the decentralized system we show that there exists a unique nash equilibrium in the players pricing game we further analyze the effects of different sourcing structures on the system performance and the assembler s performance we find that reduction of suppliers in the system does not guarantee improvement of system performance different sourcing structures have different impacts on performance when the two dedicated components are sourced from a single supplier and the common component is sourced from another independent supplier the system and the assembler s performance become worse we show that the decentralized system can be effectively coordinated and the system performance can be improved with a simple profit sharing contract finally we provide comprehensive numerical examples to demonstrate some important managerial insights

capacity optimization under uncertainty the impact of operational time lags time lags in switching operational modes are typical in the manufacturing and power sectors but are not treated in most real options models in this paper we consider a firm that has the opportunity to suspend and to resume production infinitely many times subject to a time lag after each startup decision we contribute to the literature by allowing the firm to determine its level of installed capacity in conjunction with its optimal investment timing we find that an increase in the length of the time lag results in an increase in the optimal capacity level capacity optimization also interacts with the length of the time lag to affect investment timing and the triggers to suspend and resume production thereby weakening the result about hysteresis from a standard real options model under the assumption of a fixed level of capacity a longer lag speeds up the decision to resume operations due to a positive upside to the revenue but delays the suspension of operations by contrast with capacity optimization a longer time lag results in a larger capacity choice which can indirectly delay the investment decision and the timing to resume operations this indirect effect dominates when the level of market uncertainty is low and the time lag is initially small

the dampening of competition effect of exclusive dealing using the dampening of competition approach to understanding vertical relationships this paper shows that in the absence of intrabrand retailer competition firms earn greater profits using exclusive dealing the paper explains the frequent simultaneous appearance of exclusive dealing and exclusive territoriality the results are used to analyze the famous 1949 standard stations case the author concludes that the 1949 court did the right thing for a wrong reason copyright 1990 by blackwell publishing ltd

demand uncertainty and returns policies manufacturers facing uncertain demand may induce distributors to carry ample stocks of their products by agreeing to accept returns of unsold goods for credit the authors model the manufacturer s decision to accept returns showing that this decision depends crucially on the nature of the demand uncertainty uncertainty over customer arrivals favors returns while uncertainty over consumers valuation of the manufacturer s product leads distributors to set retail prices too high from the manufacturer s standpoint when returns are allowed the authors show that returns can be expected to raise retail prices while maintaining shrinking distributor margins copyright 1995 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the value of flexibility in make to order systems the effect of demand correlation we consider a manufacturer of mass customized modular products who orders components under demand uncertainty and sets prices produces to order and trades excess components in a secondary market after this uncertainty is resolved the sequence of events reflects in a parsimonious fashion the considerable reduction in demand uncertainty between the procurement stage and the selling season typical of industries with long supply lead times and short product life cycles we prove that in contrast to conventional wisdom the value of production flexibility and expected profit increase with demand correlation if and only if commonality between the corresponding products does not exceed a threshold we also prove that the value of flexibility and expected profit may each increase or decrease with demand variability depending on demand correlations and component commonalities across the entire product line finally we prove that when demand shocks are independent the optimal product prices are positively correlated if and only if the degree of commonality between the corresponding products exceeds a threshold