screening and preventable illness if an agent does not discount the future at a constant rate as in some forms of myopia her optimal strategy is unattainable without some commitment device we apply this familiar idea to a model of screening and disease prevention and explore how financial incentives can correct suboptimal health choices in general myopia need not imply under screening while the optimal intervention for prevention effort is a state invariant subsidy the optimal intervention for screening may involve a tax or a subsidy when screening and prevention are coincident a simple and practical subsidy equal to one minus the discount factor to both screening and intervention is indicated

on the effects of downstream entry we study the effects of entry in a downstream market where firms e g compaq and ibm cvs and safeway buy an input e g microprocessor grocery items from an upstream supplier e g intel procter gamble and sell their output to consumers we show demand conditions where contrary to conventional wisdom entry of a new downstream firm lowers the downstream market output and increases the consumer price thus consumers may be better off with fewer sellers in such markets we also show that this entry may cause the profit of each incumbent downstream firm to i remain unchanged ii decrease or iii even increase also for a class of widely used demand conditions the supplier s optimal price is shown invariant to the entry exit of its downstream buyer firms we classify all possible effects of downstream entry in terms of fundamental market demand conditions

problems with identifying adjustment costs from regressions of investment on q abstract most econometricians evaluate investment q regressions by using the coefficients to estimate adjustment costs however these coefficients do not uniquely identify average adjustment costs or speeds nor do they appear in the expression for marginal adjustment costs in terms of observables

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

integrating technology traits and producer heterogeneity a mixed multinomial model of genetically modified corn adoption this article proposes a model of technology adoption that integrates demand for individual traits of new technologies with the potential for heterogeneity based on farm and farmer characteristics the model is applied to recent genetically modified corn adoption data from minnesota and wisconsin farmers using a mixed multinomial logit mmnl model to estimate the effects of traits and farm and farmer characteristics on adoption outcomes this approach allows explicit recovery of estimates of farmers shadow prices for individual technology traits results show the importance of producer and regional heterogeneity in preferences for seed traits

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

competition risk and managerial incentives this paper examines how the degree of competition among firms in an industry affects the optimal incentives that firms provide to their managers a central assumption is that there is free entry and exit in the industry which implies that changes in the nature of competition lead to changes in the equilibrium market structure the main result is that as the intensity of product market competition increases as a result of greater product substitutability or greater market size principals unambiguously provide stronger incentives to their agents to reduce costs at the same time more intense competition also leads to more volatile firm level profits consequently managers incentives are positively correlated with firm level risk consistent with empirical evidence a decrease in the cost of entering the market has the opposite effect on incentives but still induces a positive correlation between risk and incentives

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

price competition with integrated and decentralized supply chains we consider price competition with a linear demand function and compare two cases in the first case each distribution channel is vertically integrated while in the second decentralised case the manufacturers and retailers act independently we explore the effect of varying the level of price competition on the profits of the industry participants and demonstrate the important role played by the spread of underlying market shares the coefficient of variation of these market shares determines whether decentralised supply chains can outperform integrated supply chains with an appropriate level of competition

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

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

the effects of information transparency on suppliers manufacturers and consumers in online markets this paper looks into the effects of information transparency on market participants in an online trading environment we study these effects in business to business electronic markets with firms competing in both upstream and downstream industries the prior literature generally assumes that either the downstream firm buyer or the upstream firm seller is a monopoly it is not clear whether information transparency would still create value if both buyers and sellers face oligopolistic competition where the benefits of information transparency could be competed away to answer this question we first develop a simple two echelon e market model and then extend the model to more general settings we find that information transparency can create value for the overall e market yet it affects buyers and sellers very differently one side will be hurt depending on the competition mode cournot or bertrand in the downstream this suggests that a manufacturer owned a supplier owned and a neutral e market will have different preferences for information transparency finally we find that information transparency can hurt consumers when the downstream industry engages in bertrand competition this is a surprising result given the expectation that online markets create substantial value for consumers

choice of foreign market entry mode impact of ownership location and internalization factors firms interested in servicing foreign markets face a difficult decision with regards to the choice of an entry mode the options available to a firm include exporting licensing joint venture and sole venture several factors that determine the choice of a specific foreign market entry mode have been identified in previous literature these factors can be classified into three categories ownership advantages of a firm location advantages of a market and internalization advantages of integrating transactions this study examines the independent and joint influences of these factors on the choice of an entry mode multinomial logistic regression model is employed to test the hypothesized effects

optimal adoption of complementary technologies when a production process requires two extremely complementary inputs conventional wisdom holds that a firm would always upgrade them simultaneously we show however that if upgrading each input involves a fixed cost the firm may upgrade them at different dates asynchronously this insight helps us understand why productivity rises with the age of a plant why investment in structures is more spiked than equipment investment and why plants have spare capacity the bigger point of the paper is that complementarity does not necessarily imply comovementnot even for a single decision maker jel e22 031 p11

decentralized industrialization and rural development evidence from taiwan after 3 decades of growth widespread poverty persists in underdeveloped countries one of the major characteristics of the poor is that a disproportionate number of them are located in rural areas since a large number of the rural poor have limited or no access to productive agricultural land raising agricultural productivity alone may be insufficient to reduce rural poverty consequently attention has now turned to rural nonfarm activities as a possible source of rural employment and income this paper uses evidence from taiwan to show that the level of rural nonfarm ac

exclusive territories and manufacturers collusion this paper highlights the rationale for exclusive territories in a model of repeated interaction between competing supply chains we show that with observable contracts exclusive territories have two countervailing effects on manufacturers incentives to sustain tacit collusion first granting local monopolies to retailers softens competition in a one shot game hence punishment profits are larger thereby rendering deviation more profitable second exclusive territories stifle deviation profits because retailers of competing brands adjust their prices to the wholesale contract offered by a deviant manufacturer whereas intrabrand competition prevents such instantaneous reaction we show that the latter effect tends to dominate thereby making exclusive territories a more suitable organizational mode to cooperate these insights are robust to endogenous communication between manufacturers we also consider retailers service investments here a novel effect emerges that softens the procollusive value of exclusive territories retailers of a deviant manufacturer increase investments which renders deviation more profitable this paper was accepted by preyas desai marketing

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

strategic decentralization in channels the purpose of this paper is to understand the effect of strategic interaction on a manufacturer s channel structure decision in the model i analyze if there were no strategic interaction then the manufacturer would prefer vertical integration to decentralization with strategic interaction however decentralization can be a nash equilibrium strategy as mcguire and staein mcguire timothy richard staelin 1983a an industry equilibrium analysis of downstream vertical integration marketing sci 2spring 161 192 showed so the question arises what is it about strategic interaction that makes decentralization a nash equilibrium strategy the answer i give is that strategic interaction makes it possible for a manufacturer s retail demand curve to rise when he decentralizes i show that this raising of the demand curve on decentralization can happen only if one of the following mutually exclusive conditions is satisfied 1 the manufacturers products are demand substitutes at the retail level and strategic complements at the manufacturer or retailer levels 2 the manufacturer s products are demand complements at the retail level and strategic substitutes at the manufacturer or retailer levels strategic complementarity at the retailer manufacturer level means that if one retailer manufacturer raises his price then the other retailer manufacturer would raise his price as well strategic substitutability is just the opposite these results show that what is important for decentralization to occur is not how demand substitutable the two manufacturers products are as one might have thought from earlier works in the literature but rather the nature of coupling between demand dependence and strategic dependence

bargaining in competing supply chains with uncertainty abstract substantial literature has been devoted to supply chain coordination the majority of this literature ignores competition between supply chains moreover a significant part of this literature focuses on coordination that induce the supply chain members to follow strategies that produce the equilibria chosen by a vertically integrated supply chain this paper investigates the equilibrium behavior of two competing supply chains in the presence of demand uncertainty we consider joint pricing and quantity decisions and competition under three possible supply chain strategies vertical integration vi manufacturer s stackelberg ms and bargaining on the wholesale price bw is the bargaining parameter over a single or infinitely many periods we show that in contrast to earlier literature using vivi vi in both chains is the unique nash equilibrium over one period decision while using msms or bw bw may be nash equilibrium over infinitely many periods

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

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

adoption transfers and incentives in a franchise network with positive externalities we study franchise arrangements that allow franchisees with exclusive territories to own their customers this permits franchisees to benefit from positive externalities in the franchise network through interfranchise transfers based on the purchases by their customers at other franchises on the network using the structure of a single franchisor and many franchisees we show that in general interfranchise transfers between franchisees and incentives for franchisee investment in the expansion of their customer base are critical both to the size and to the benefits derived from the franchise network specifically we find that when individual franchisees make investments in marketing effort to increase their customer base the franchisor s setting of the interfranchise transfer trades off the positive effects on network size with the negative effects of removing franchisee incentive for investment this result is due to the fact that interfranchise transfers encourage adoption but discourage full investment in marketing effort as compared to first best franchisee investment use of the royalty and the inter franchise transfer directly dissipates franchisee profits and indirectly dissipates franchisee profits through less than universal adoption thereby causing franchisees to underinvest as compared to traditional franchise systems however use of the interfranchise transfer results in franchises making greater investments than they otherwise would

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

research note channel structure with knowledge spillovers we study two main questions in this paper 1 how do spillovers of knowledge created by manufacturers investments in process innovation affect channel structure and effort investment incentives 2 what are the interactions between organizational incentives to form joint ventures and strategic alliances with competitors and coordinate decisions vertically with downstream channel members we focus on situations where spillovers are involuntary firms innovative activities are nonoverlapping and firms benefit directly from the results of competitors innovations under these conditions we find that spillovers in process knowledge increase the likelihood of observing decentralized channel structures surprisingly decentralized manufacturers invest more in process innovation than perfectly coordinated manufacturers do when spillovers are large moreover in industries where large spillovers exist horizontal cooperation among manufacturers induces higher levels of process innovation investments than channel coordination does from a public policy perspective however the desirability of such cooperative arrangements among competitors depends on channel structure joint ventures among decentralized manufacturers are more likely to meet the regulators criteria of raising effort investments than cooperation among integrated manufacturers would be investment incentives are best provided when firms share their process knowledge and are buffered from subsequent price competition by independent retailers

non farm income and inequality in rural pakistan a decomposition analysis this article uses three year panel data to analyse the impact of non farm income on income inequality in rural pakistan after pinpointing the importance of rural non farm income for the poor the article decomposes total rural income among five sources non farm agricultural livestock rental and transfer this decomposition shows that non farm income represents an inequality decreasing source of income the study then decomposes the sources of non farm income this analysis reveals that while non farm unskilled labour income has an equalising effect on income distribution non farm government income has a disequalising effect

the bright side of having an enemy conventional wisdom suggests that more intense competition will lower firms profits the authors show that this may not hold in a channel setting with exclusive retailers they find that a manufac

research note vertical information sharing in a volatile market when demand is uncertain manufacturers and retailers often have private information on future demand and such information asymmetry impacts strategic interaction in distribution channels in this paper we investigate a channel consisting of a manufacturer and a downstream retailer facing a product market characterized by short product life uncertain demand and price rigidity assuming the firms have asymmetric information about the demand volatility we examine the potential benefits of sharing information and contracts that facilitate such cooperation we conclude that under a wholesale price regime information sharing might not improve channel profits when the retailer underestimates the demand volatility but the manufacturer does not although information sharing is always beneficial under a two part tariff regime it is in general not sufficient to achieve sharing and additional contractual arrangements are necessary the contract types we consider to facilitate sharing are profit sharing and buyback contracts

equilibrium returns policies in the presence of supplier competition the pioneering pasternack returns policy model analyzed channel coordination with a single supplier catering to a retailer facing stochastic demand for a perishable product with a fixed price and the model showed that giving partial returns of unsold stock to the retailer is the optimal policy for the entire supply chain the result thus begs the question as to why manufacturers of perishable commodities widely accept full returns of unsold stock as the norm we model the environment as one where two capacity constrained manufacturers compete for shelf space with the same retailer and we show that a complete credit returns policy is in fact the only possible equilibrium of the game our results obviate the need for knowing the exact functional form of the demand distribution in order to compute the returns credit as pasternack s results would require from a retailer s standpoint we establish a simple procurement strategy and show that it is optimal the same game with price only contracting has a pure strategy equilibrium when the supplier capacities are below a threshold value and a mixed strategy equilibrium when the supplier capacities cross this threshold but are still so limited that no single supplier can with certainty supply all the quantity demanded

delegating pricing decisions an outstanding problem in marketing is why some firms in a competitive market delegate pricing decisions to agents and other firms do not this paper analyzes the impact of competition on the delegation decision and in turn the impact of delegation on prices and incentives the theory builds on the simplest framework of competition in two dimensions prices and sales agents effort specifically we are interested in answering the following questions 1 does competition affect the price delegation decision and if yes why 2 how do prices vary under price delegation and no price delegation scenarios 3 do the incentives to the sales representatives vary under the delegation and no delegation scenarios to address these issues we build a game theoretic model that consists of two firms selling through their sales representatives these representatives are company employees sales are a function of prices and selling efforts the risk neutral firms decide whether or not to delegate the pricing decision to risk averse sales representatives the wages to the sales representatives consist of salary plus a commission on gross margins the commission on gross margins can be adjusted either through communicated marginal cost of production which we call virtual marginal cost or directly the firm and the sales representative are assumed to have the same information about the market that is there is no information asymmetry with competition in two dimensions the strategic nature of decision variableprice depends on the relative intensity of competition with unobservable contracts and risk averse sales representatives firms delegate the pricing decision when price competition is intense part of the uncertainty in demand is absorbed by the firm by keeping virtual marginal cost greater than the marginal cost of production the competing firm infers this through the risk aversion of the sales representatives under price delegation the sales representatives wages are higher and they set a price that is higher than what the firms would have set themselves this leads to softening of price competition that is to the advantage of both firms when the effort competition is dominant however the firms prefer to make the pricing decision themselves because this reduces the intensity of effort competition among agents a single instrument commission structure in which the firms adjust the virtual marginal cost is compared to a two instrument commission structure in which the firms can adjust the commission rate as well the virtual marginal cost under no price delegation the two incentive schemes are the same however under price delegation the risk premium with the two instrument scheme is lower however the prices and efforts are higher with the single instrument scheme when price competition is intense the increase in risk premium with the single instrument scheme is more than compensated for by the increase in profits this is the benefit of softening price competition through higher prices

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

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

pricing information goods a strategic analysis of the selling and pay per use mechanisms we analyze two pricing mechanisms for information goods these mechanisms are selling where up front payment allows unrestricted use and pay per use where payments are tailored to use we analytically model a market where consumers differ in use frequency and where use on a pay per use basis invokes a psychological cost associated with the well known ticking meter effect we demonstrate that pay per use yields higher profits in a monopoly provided the associated psychological cost is low in a duopoly one firm uses selling and the other uses pay per use here in contrast to the monopoly selling yields higher profits than pay per use we demonstrate that surprisingly the profits of both duopolists can increase as the psychological cost associated with pay per use increases next we show that uncertainty in consumer use frequency does not affect pay per use in a monopoly but lowers profits from selling in a duopoly both the seller and the pay per use provider obtain lower profits when use frequency is uncertain we also analyze how pricing mechanism performance is affected if the firms cannot commit to prices if the pay per use provider offers a two part tariff and if consumers are risk averse

when good news about your rival is good for you the effect of third party information on the division of channel profits the internet has led to a large number of third party sources that offer high quality information about firms s products at little or no cost to consumers as a result many of these sources have grown in popularity extending well beyond the usual reach of traditional third parties such asconsumer reports andkelly s blue book for example the online version ofedmunds offers at no cost to consumers information about new products existing products long term tests and buyers guides all relating to the automotive industry avweb com delivers weekly aviation news and new product reviews to its readers and a large number of websites follow developments on computer platforms such as the apple macintosh in this paper we analyze how the provision of third party information affects the division of profits in a multiproduct distribution channel to illustrate consider the competition between microsoft and apple in the operating systems os market and their channel relationship to compusa a retailer that sells both macs and windows based pcs consider two pieces of thirdparty information first suppose that cnet an internet technology site reviews the newest upgrade of the macos and writes that the new user interface is even easier to use than previously second suppose that an article in the technology section of thewall street journal notes that changes in apple s networking support now enable macs to be better integrated into pc networks these two pieces of information are similar in the sense that they both express good news about the macos and thus they both can be expected to benefit apple by increasing consumer demand for macs one might also expect that in both cases compusa will capture some of the gains that come from the increased demand for macs and that microsoft will lose because the good news about the macos will induce some consumers to choose macs over windows based pcs however we will show that this intuition is incorrect the two reviews can have surprisingly different implications for the profits of microsoft and compusa the reason is that the two reviews differ on one crucial dimension the group of customers for whom they are primarily relevant the cnet review talks about improvements in the customer interface precisely what apple score consumers care about thewall street journal review talks about compatibility with prevailing pc standards important to consumers who care relatively more about compatibility and who are thus more likely to prefer windows apple snoncore consumers we show that good news about the macos that is more relevant to apple s core consumers the cnet review benefits microsoft but harms compusa while good news about the macos that is more relevant to apple s noncore consumers thewall street journal review has the opposite effect it harms microsoft but benefits compusa stated more generally our main result is that when third party information affects consumers product valuations the type of information that induces the change is critical to understanding which firms gain and which firms lose in particular depending on the type of third party information we find that 1 a retailer can be harmed by good news about a product that it carries 2 a manufacturer can gain from good news about a rival s product and 3 good news about a product category need not benefit all the manufacturers in that category there are three novel features of the analysis first we derive the equilibrium division of profit among firms when a retailer sells the products of competing manufacturers and we have done so while placing few restrictions on the feasible set of contracts second we show how this equilibrium division of profit lends itself to a simple graphical interpretation that depicts which firms gain and which firms lose from third party information third we provide a taxonomy of information types and identify the key features of each type that cause profit incentives to vary in particular we conceptualize information as having three components namely 1 the products to which the information pertains 2 whether the information is positive or negative and 3 the consumers to whom the information is relevant we show that all three information components play a role in determining the change in each firm s profit our framework can also be used to analyze a variety of other settings of interest for example it can be used to analyze profit incentives when the retailer has bargaining power when there is downstream competition and when there are non information based changes in consumers valuations in addition our framework may be used both to analyze the effects on profits of persuasive advertising and to predict advertising content

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

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

chain to chain competition on product sustainability this paper studies the game model of two sustainable supply chains under competition in product sustainability derives the equilibrium structures of the two chain system and generates the managerial insights when the supplier and manufacturer within the reverse supply chain are competitive the sustainability degrees demands and profits under three structures of this two chain system are analyzed it is found that although vertical integration is always a nash equilibrium it is pareto optimal only when the competition degree is low on the other hand a more generalized case for the former model is investigated when the supplier and manufacturer are cooperative in bargaining the wholesale price and the effects of bargaining power to the sustainability degrees demands and chain member profits are studied it is further shown that the structure of vertical integration channels is not an equilibrium unless the two sustainable supply chains are independent

the timing of pay abstract there exists large and persistent variation in not only how but when employees are paid a fact unexplained by existing theory this paper develops a simple model of optimal pay timing for firms when workers have self control problems they under save and experience volatile consumption between paychecks thus pay whose delivery matches the timing of workers consumption needs will reduce wage costs the model also explains why pay timing should be regulated as it is in practice although the worker benefits from a timing profile that smoothes her consumption her lack of self control induces her to attempt to undo the arrangement either by renegotiating with her employer or by taking out payday loans regulation of pay timing and consumer borrowing is required to counter these efforts helping the worker help herself

the q theory of investment with many capital goods the q theory of investment which relates investment to the ratio of market to replacement value of capital has attracted considerable attention in a recent series of papers for instance a q variable has been used as an independent variable in empirical investment equations estimated by george von furstenberg 1977 von furstenberg et al 1980 burton malkiel et al 1979 and others these papers however leave somewhat unclear the theoretical rationale for using q as an investment determinant this has motivated work by hiroshi yoshikawa 1980 lawrence summers 1981 michael salinger and summers 1981 and fumio hayashi 1982 who show that under certain conditions the rate of investment of a sharevalue maximizing firm is indeed a function of q this is an important result because it shows that investment equations with q an independent variable are not ad hoc constructions rather they are grounded in a theory of the firm with an appealing behavioral hypothesis viz value maximization an important assumption underlying this research is that capital can be treated as a homogeneous good of course this is an extremely common assumption in the analysis of investment and is not particularly more bothersome in the q theory context than elsewhere nonetheless there are certain situations where it may be desirable or even essential to be able to study investment disaggregated by type of capital good thus the purpose of this paper is to examine whether and how the q theory can be extended to this more general case 1 intuitively one would expect some difficulty with the q theory in the many capitalgood context as already noted by james tobin and william brainard 1977 p 243 and by salinger and summers p 12 one way to see why is to recall the tobin brainard distinction between marginal and average q as hayashi writes

aggregating quasi fixed factors the problem of aggregating quasi fixed factors within the context of the adjustment cost model is addressed two alternative theoretical justifications are considered one based on a form of hicks aggregation and the other on weak separability it is argued that the latter is not relevant to practical situations on the other hand the former can be used to justify empirical dynamic factor demand studies which employ aggregated input categories some implications for data construction procedures are discussed

limited attention interaction and the gradual adjustment of a firm s decisions a person cannot make many decisions at a time but an organization needs millions of interrelated decisions we incorporate this idea into a standard theory of production two assumptions are emphasized an agent cannot optimize more than one input at a time and there is interaction among inputs when a firm alternates its attention the demand for inputs gradually adjusts to the static optimal level when a firm optimally allocates its attention this adjustment may not occur we investigate the conditions under which the adjustment takes place the results are applied to a standard investment theory the derived investment capital ratio is independent of firm size and imperfectly correlated with tobin s q

strategic commitment versus postponement in a two tier supply chain abstract in this paper the trade off between strategic commitment and operational flexibility is examined as it arises in a supply chain when a supplier offers competing buyers opportunities to make early purchase commitments for a product with a short life cycle traditionally the use of incentives for early purchase commitments for short life cycle products has been justified on the basis of a supplier s production lead times or capacity constraints an alternative explanation has been proposed by offering early purchasing opportunities a supplier can influence the form of competition in the downstream market using a single period model it has been shown that below a threshold level of demand uncertainty the supplier can benefit from providing adequate pricing incentives to entice downstream buyers to commit to purchase quantities before demand information is revealed moreover such early purchasing opportunities can benefit the supplier as well as the buyers even in the absence of production lead times or capacity constraints

process innovation product differentiation and channel structure strategic incentives in a duopoly in this paper we analyze the joint implications of two effects a inserting independent profit maximizing retailers into thechannel system provides buffering to the manufacturers from price competition when their products are highly substitutable and intrachannel contracts are observable as shown by mcguire and staelin 1983 under the assumption of constant marginal production costs and b lack of channel coordination results in a reduction in manufacturer s incentives to invest in efforts to reduce production costs as shown by jeuland and shugan 1983 for the case of bilateral monopoly we show that both these results are robust in the sense that the first holds even in the presence of the vertical externality of manufacturer s effort reduction in a noncoordinated channel and the second holds regardless of the degree of substitutability between the competing channel s products specifically we analyze a four stage game with two manufacturers and two retailers where the intrachannel contracts are linear and observable and manufacturers make investments in process improvements to reduce their production costs we find that the optimal channel structure decision depends on interactions between two parameters the degree of substitutability between products and the level of investments required to achieve production cost reduction these parameters represent what have been widely interpreted in the management literature as the two primary generic strategies that most organizations follow in order to gain competitive advantage cost leadership and product differentiation porter 1980 thus our analysis brings out the strategic and interdisciplinary nature of the channel structure decision that can significantly affect firm profitability our main results are as follows first we find that decentralized noncoordinated channels appear as more profitable equilibrium than integration or perfectly coordinated channels at high product substitutability even when process innovation dimension is accounted for in agreement with the literature however the range of substitutability over which decentralization is an equilibrium strategy is smaller the easier it is to reduce production costs intuitively the easier the cost reduction the larger the cost penalty that the channel incurs as a result of not coordinating investment and pricing decisions between channel members and thus smaller the range over which decentralization is an equilibrium this implies that there is an explicit tradeoff between efficiency and strategic incentives in distribution channel design second we show that decentralized manufacturers invest less in process innovation than integrated manufacturers do regardless of the structure of the competing channel and the degree of substitutability between products consequently a decentralized channel has higher costs charges higher prices and produces lower quantities than an integrated channel does moreover these differences get larger the easier the cost reduction the effect on manufacturer profits however is not that clear manufacturers make higher profits by decentralizing if products are highly substitutable inagreement with mcguire and staelin 1983 and coughlan and wernerfelt 1989 however we also find that the relative profitability of decentralization at high substitutability and of integration at low substitutability increases the easier the cost reduction moreover the range of substitutability over which decentralization is more profitable than integration is itself larger the easier the cost reduction though decentralization is an equilibrium strategy over a smallerrange thus process innovation accentuates the profit difference between integrated and decentralized channels andmakes the prisoner s dilemma situation worse in the choice of distribution channel structure finally we analyze two examples of coordinated decision making in a channel a divisional integrated system and franchising in the first case we find that decentralization can emerge as a unique and more profitable equilibrium at high product substitutability in contrast to mcguire and staelin 1983 in the second case we find that decentralization is not always a unique equilibrium and it is not always more profitable than integration in sharp contrast to the results by coughlan and wernerfelt 1989 thus franchising does not provide a sure way of achieving channel coordination when marginal production costs are not constant in sum this paper highlights the importance of simultaneously considering both the horizontal and the vertical dimensions of interorganizational relations on one hand and on the other paying attention to cross functional interactions across marketing and operational decisions to better understand the underlying incentives that shape firm and market structures conventional focus of marketing on demand side effects and of operations on cost side effects can lead to suboptimal decisions

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

product market competition and boundaries of the firm this paper studies the effects of product market competition on firm boundaries in a duopoly setting each retailer is associated with a manufacturer who must decide how to allocate property rights over a retail asset delegating property rights over the retail asset to an indepedent retailer disintegration transfers incentives from the manufacturer to the retailer and has the benefit of increasing product quality and profits owing to the retailer s superior efficiency however it also forces the manufacturer to forfeit part of the profits competition increases the net benefit from delegation and leads to more efficient vertically disintegrated structures cet article etudie la concurrence sur le marche des produits et ses effets sur les limites de l entreprise dans un modele de duopole chaque producteur associea un distributeur choisit soit une structure verticale integree dans laquelle le distributeur est son employe soit une structure desintegree dans laquelle le distributeur est independant plus efficace en termes d incitations au distributeur la structure desintegree genere des profits joints plus importants elle oblige cependant le producteur a partager les profits avec le distributeur la concurrence augmente le benefice et reduit le cout de la desintegration favorisant ainsi des structures verticales desintegrees et efficaces

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

rural nonagricultural activities in development theory and application abstract this paper focusses on the potentially important role of rural nonagricultural activity in the development process using the hymer resnick z goods model as a point of departure we first show that its pessimistic conclusions are based on rather restrictive assumptions as applied to the colonial period we relax these assumptions indicating the theoretical possibility of a substantially more positive scenario for that period subsequently we analyze the role of z goods traditional and nontraditional in the post independence era again distinguishing between archetypal pessimistic and optimistic cases finally the comparative historical experience of the philippines and taiwan is brought to bear to illustrate the argument empirically

product positioning under price competition this paper presents a consumer based methodology for new product pricing and positioning in the face of price competition the price competition is modelled as a nash equilibrium for which two complementary approaches are employed an analytical approach of duopoly provides qualitative insights into the competitive behavior and a numerical approach of general oligopoly provides quantitative solutions under a wide variety of market scenarios the optimal product positioning is formulated as a stackelberg nash leader followers equilibrium which can be solved numerically using recent advances in the field of variational inequalities a small example concerning analgesics is used to illustrate this methodology

the relation between firm growth and q with multiple capital goods theory and evidence from panel data on japanese firms we derive from a model of investment with multiple capital goods a one to one relation between the growth rate of the capital aggregate and the stock market based q we estimate the growth q relation using a panel of japanese manufacturing firms taking into account the endogeneity of q identification is achieved by combining the theoretical structure of the q model and an assumed serial correlation structure of the technology shock which is the error term in the growth q equation for early years of our sample cash flow has significant explanatory power over and above q the significance of cash flow disappears for more recent years for the heavy industry when japanese capital markets was liberalized the estimated q coefficient implies that the adjustment cost is less than a half of gross profits net of the adjustment cost

entrepreneurship and rural industrialization comparing urban and rural patterns of locational choice in israel abstract the role of the local entrepreneur in the development of rural industrialization is often overlooked based on an empirical survey of entrepreneurs in both urban and rural areas in israel this paper shows that the rural setting scores less favorably than the urban for nearly all those locational attributes that would attract industrial development consequently the chances of attracting external initiatives to rural areas would seem slim instead it is argued that a strategy for rural industrial development needs to be based on the mobilization of indigenous entrepreneurial potential for which the rural setting provides a subjective relative advantage

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

implementable mechanisms to coordinate horizontal alliances unprecedented changes in the economics of interaction mainly as a result of advances in information and telecommunication technologies such as the internet are causing a shift toward more networked forms of organizations such as horizontal alliances that is alliances among firms in similar businesses that have positive externalities between them because the success of such horizontal alliances depends crucially on aligning individual alliance member incentives with those of the alliance as a whole it is important to find coordination mechanisms that achieve this alignment and are simple to implement in this paper we examine two simple coordination mechanisms for a horizontal alliance characterized by the following features i firms in the alliance can exert effort only in their local markets to increase customer demand for the alliance ii customers are mobile and a customer living in a given alliance member s local area may have a need to buy from some other alliance member and iii the coordination rules followed by the alliance determine which firms from a large pool of potential member firms join the alliance and how much effort each firm joining the alliance exerts in its local market in this horizontal alliance setup we consider the use of two coordination mechanisms i a linear transfer of fees between members if demand from one member s local customer is served by another member and ii ownership of an equal share of the alliance profits generated from a royalty on each member s sales we derive conditions on the distribution of demand externalities among alliance members to determine when each coordination mechanism should be used separately and when the mechanisms should be used together

agricultural technology and farm nonfarm growth linkages abstract agricultural growth stimulates rural nonfarm activity by boosting demand for production inputs and consumer goods but different kinds of agricultural technology promote different patterns of nonfarm linkages to explore how key features of agricultural technology affect growth in the rural nonfarm economy this paper reviews an array of cross section and time series evidence bearing on the dynamics of the rural nonfarm economy then using consumption and production parameters associated with different agricultural technologies it introduces a simple model which isolates the effects of different technologies on nonfarm growth linkages

launching new products through exclusive sales channels when launching a new product a manufacturer usually sells it through competing retailers under non exclusive arrangements recently many new products cellphones electronics toys etc are sold through a single sales channel via an exclusive arrangement in this paper we present two separate models that examine these two arrangements each model is based on a stackelberg game in which the manufacturer acts as the leader by setting the wholesale price and the retailers act as the followers by choosing their retail prices for each model we solve the stackelberg game by determining the manufacturer s optimal wholesale price and each retailer s optimal retail price in equilibrium then we examine the conditions under which the manufacturer should sell the new product through an exclusive retailer in addition we examine the impact of postponing the wholesale price decision and the impact of demand uncertainty on the manufacturer s optimal profit under both arrangements

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

small industry in developing countries a discussion of issues abstract this paper first examines the changing size distribution of industry in developing countries by region and over time and by reference to firm level surveys it discusses the underlying causes the importance of markets generated by the growth of agriculture and rural incomes for the regional development of industry both small and large scale is noted second it discusses the entrepreneurship issue arguing that while small and largefirms alike are highly responsive to the growth of markets the measured entrepreneurial response is neither as full nor as efficient as is desirable the third and last part discusses small industry programmes and their relation to development policy financing and extension programmes are considered in detail and there is a discussion of the risks involved some parallels with agricultural credit are discussed in particular the default problem and the problems associated with concessionary finance it is also argued that small industries and by implication the programmes intended to support them would stand to benefit from more efficient and also more labour demanding policies towards agriculture and industry

investment cash flow sensitivities credit rationing and financing constraints in small and medium sized firms the controversy on whether investment cash flow sensitivity is a good indicator of financing constraints is still unsolved we apply a comprehensive approach by cross validating our analysis with both balance sheet and qualitative data on self declared credit rationing and financing constraints on a sample of mainly small and medium sized firms our qualitative information shows that self declared credit rationing is weakly related to both traditional a priori factors such as firm size age and location and lenders rational decisions taken on the basis of their credit risk models we use the qualitative information on firms which were denied additional credit to provide evidence relevant to the investment cash flow sensitivity debate the evidence shows that self declared credit rationing significantly discriminates between firms which possess or not such sensitivity while a priori criteria do not the same result does not apply when we consider the wider group of financially constrained firms which do not seem to have a higher investment cash flow sensitivity supporting the more recent empirical evidence in this direction

when is servitization a profitable competitive strategy abstract although servitization has emerged as a new competitive strategy for manufacturers there has been little research about product level servitization we investigate the competition between two channels one separately providing both goods and services and the other providing inseparable servitized goods through a game theoretic approach two critical parameters to understand competition between the two channels will be proposed 1 service dependency a degree of dependency of physical goods upon services and 2 channel substitutability a degree of substitution between conventional channels and servitized one the study reveals that the servitization strategy is a better choice for a manufacturer selling physical goods only when the goods require a higher level of service i e high service dependency and when the competition between the two channels is more severe i e high channel substitutability in addition obtaining cost efficiency is found to be an important factor to achieve higher competitive advantage over the other channel