competitive nonlinear tariffs abstract this paper generalizes the study of nonlinear tariffs i e those depending nonlinearly on the quantity purchased to the case of a symmetric oligopoly competitive equilibria and the corresponding tariffs are analyzed in a cournot framework various equilibria are obtained which depend both upon the number of competing suppliers and the choice of market parameters used to characterize the competitors strategies buyers are classified by type each selecting an optimal consumption level in response to the prevailing tariff the phenomena of buyer self selection found in monopoly nonlinear pricing and the scaling of equilibrium demand elasticity found in cournot models both appear in the results

peer pressure and partnerships partnerships and profit sharing are often claimed to motivate workers by giving them a share of the pie but in organizations of any significant size the free rider effects would seem to choke off

moral hazard and the portfolio management problem this paper investigates the significance of nonlinear contracts on the incentive for portfolio managers to collect information in addition the manager must be motivated to disclose this information truthfully we analyze three contracting regimes 1 first best where effort is observable 2 linear with unobservable effort and 3 the optimal contract within the bhattacharya pfleiderer quadratic class we find that the linear contract leads to a serious lack of effort expenditure by the manager this underinvestment problem can be successfully overcome through the use of quadratic contracts these contracts are shown to be asymptotically optimal for very risk tolerant principals

overconfidence and moral hazard abstract in this paper i study the effects of overconfidence on incentive contracts in a moral hazard framework agent overconfidence can have conflicting effects on the equilibrium contract on the one hand an optimistic or overconfident agent disproportionately values success contingent payments and thus prefers higher powered incentives on the other hand if the agent overestimates the extent to which his actions affect outcomes lower powered incentives are sufficient to induce any given effort level if the agent is moderately overconfident the latter effect dominates because the agent bears less risk in this case there are efficiency gains stemming from his overconfidence if the agent is significantly overconfident the former effect dominates the agent is then exposed to an excessive amount of risk and any gains arise only from risk sharing under disagreement an increase in optimism or overconfidence increases the effort level implemented in equilibrium

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

a classification of literature on determining the lot size under quantity discounts abstract determining a lot size in the presence of either all units or incremental discounts has represented one of major interests of materials managers it is a common practice that the suppliers offer quantity discount to entice the buyers to purchase more and to achieve economies of scale for transportation and processing costs this paper will classify the literature on lot sizing determination under several types of discount schemes and discuss some of the significant literature in this area over two decades also some future research areas have been identified

on the validity of aggregate models in designing supply chain contracts abstract the vast majority of the existing papers on supply chain contracts analyse these contracts based on a highly aggregate model description of the supply chain recognizing the high complexity of real supply chain systems such models can naturally only be rough approximations of reality out of the many possible ways for aggregating a planning model our study focuses on item aggregation here due to computational informational or organizational reasons a multi product reality is approximated by a model representation with fewer products we explore the aggregation error made when using an aggregate model in order to optimize a supply chain contract which is subsequently applied to a more detailed real system based on a numerical analysis it is shown that the design of supply chain contracts by means of an aggregate planning model may lead to significant suboptimalities

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

spatial pricing in the united states west germany and japan this paper investigates the spatial pricing policies of a sample of firms in the united states west germany and japan we begin in section i by providing general results for the three countries these suggest that f o b pricing is the exception rather than the rule furthermore there appear to be significant differences between the countries in the degree of spatial price discrimination the remainder of the paper examines whether the inter country differences in spatial discrimination can be explained by a theory of spatial pricing section ii uses the theory of spatial pricing proposed in greenhut and greenhut 1975 to derive an operational model in section iii the parameters of this model are estimated from the individual country data and the results are discussed section iv presents the conclusions the data used in this study were obtained from a survey of firms in the three countries in each country target regions were selected with a similar urban rural proportions as restricted by b existing acquaintanceships with professors in or near these urban rural centres survey constraint b was imposed after a mailed questionnaire pilot study in the united states had indicated a likely need for follow up mailings phone calls and even interviews before a sufficient number of responses from a particular place e g a particular state in the united states could be expected after selecting our comparable survey areas firms were picked at random from industrial lists of business establishments in each country and questionnaires were mailed to them the questionnaire is reproduced in the appendix the firms that returned questionnaires were compared to non responding firms no distinction in size of firm industry type or location was apparent for any country or sub region studied among the respondents we dropped from the sample all firms that were not subject to a significant freight cost defined to be a 5 per cent minimum freight cost to delivered cost ratio on sales to at least one distant market point our findings on pricing strategies are summarized in table 1 firms in the united states tend to price discriminatorily of 174 sampled firms less than one third priced non discriminatorily f o b the spokesmen for the remaining firms 67 per cent admitted that they did not add full freight cost to their mill price on all of their distant sales these firms therefore priced discriminatorily the tendency to price discriminatorily is even greater in west germany and japan with the percentage of discriminating firms approximately

note comments on a quantity discount pricing model to increase vendor profits monahan monahan j p 1984 a quantity discount pricing model to increase vendor profits management sci june 720 726 adapted the quantity discount model of inventory theory to the problem of determining an optimal quantity discount schedule from a vendor s point of view and opened up an important direction of research however his one item one customer one vendor model is based on several implicit assumptions that must be judged unreasonable monahan must account for the vendor s inventory carrying charges and redefine his variable s2 it is shown that a rational vendor s manufacturing frequency would not be identical to the buyer s ordering frequency if the vendor s manufacturing setup costs are substantially larger than the buyer s ordering costs a numerical example presented in this note also questions the practical usefulness of monahan s model even after its theoretical inaccuracies axe corrected monahan s model may explain discounts that are a fraction of 1 of the price of an item but it fails to explain commonly observed magnitudes of quantity discounts such as 10 of the unit price

the effects of optimism bias in teams this article imports a behavioural perspective into a team context to study the effort coordination problem among agents specifically we investigate how the presence of optimism bias impacts the severity of the free rider problem the organizational structure of the team and the compensation contracts offered to agents in equilibrium the results indicate that all agents become more reluctant to exert effort and the team welfare decreases when some of its agents are optimistic suggesting that optimism aggravates the free rider problem in teams appointing a team leader makes all agents work harder and the team benefits more by having the optimistic agent as its leader these findings are in sharp contrast to the effects of overconfidence as identified in the literature it is advisable to pay the optimistic agents less than the rational agents encouragingly optimistic agents can learn about their own bias in the long run leaving their team without too much detriment of optimism

ceo optimism and forced turnover abstract we show theoretically that optimism can lead a risk averse chief executive officer ceo to choose the first best investment level that maximizes shareholder value optimism below above the interior optimum leads the ceo to underinvest overinvest hence if boards of directors act in the interests of shareholders ceos with relatively low or high optimism face a higher probability of forced turnover than moderately optimistic ceos face using a large sample of turnovers we find strong empirical support for this prediction the results are consistent with the view that there is an interior optimum level of managerial optimism that maximizes firm value

incentives and the structure of teams abstract this paper studies the relationship between moral hazard and the matching structure of teams we show that team incentive problems may generate monotone matching predictions in the absence of complementarities in the production technology second we analyze how complementarity in the underlying technology affects the matching predictions arising due to moral hazard we find that i even when the production technology is strongly complementary the incentive problem may lead to formation of negatively sorted teams ii as the degree of complementarity increases the optimal matching structure may switch from positive to negative solely due to the need to provide incentives

cournot competition yields spatial agglomeration most theoretical models of spatial competition show a strong tendency toward spatial dispersion of firms yet common observations suggest that firms tend to agglomerate in this paper the authors show that competition between cournot type oligopolists that discriminate over space leads to spatial agglomeration one implication is that firms do not necessarily earn supernormal profits at the free entry equilibrium copyright 1991 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

optimal contracts for teams in a team subject to both adverse selection each member s ability is known only to himself and moral hazard effort cannot be observed optimal contracts are under certain conditions linear in the team s output the outcome is the same whether the principal observes just the total output or each individual s contribution thus monitoring is not needed to prevent shirking by team members instead the role of monitoring is to discipline the monitor production is a collective enterprise by workers in a firm or firms in a joint venture the synergy that is the reason for the team s existence may mean that an individual s contribution to the team s output is not distinguishable so that it is impossible to pay him according to his own productivity how should the principal remunerate the team members so as to maximize his own profit in this paper we analyze incentives in teams with asymmetric information both adverse selection each member s ability is known only to himself and moral hazard effort cannot be observed directly holmstrom 1982 showed that in a team model with moral hazard the principal can ensure an outcome arbitrarily close to the full information ideal by using a contract that punishes each team member arbitrarily severely whenever team output falls below some target however this seems to be an unrealistically drastic way of solving the moral hazard problem in our model we in effect prevent the principal from using such a contract by introducing adverse selection in addition to moral hazard and by assuming that ability and effort interact in such a way that the principal is unable to disentangle an agent s effort from his ability under the assumption that the principal and the team members are risk neutral we shall show that the principal can implement his information constrained optimum simply by offering each agent a payment linear in the team s output although the essential feature of our analysis is the interaction between adverse selection and moral hazard this result can be understood by first considering the special case in which the agents abilities are common knowledge in this case the moral hazard problem can be completely solved the principal can do as well as he

toward an economic theory of leadership leading by example this paper explores leadership within organizations leadership is distinct from authority because following a leader is a voluntary rather than coerced activity of the followers this paper considers how a leader induces rational agents to follow her in situations when the leader has incentives to mislead them copyright 1998 by american economic association

fund families as delegated monitors of money managers because a money manager learns more about her skill from her management experience than outsiders can learn from her realized returns she expects inefficiency in future contracts that condition exclusively on realized returns a fund family that learns what the manager learns can reduce this inefficiency cost if the family is large enough the family s incentive is to retain any given manager regardless of her skill but when the family has enough managers it adds value by boosting the credibility of its retentions through the firing of others as the number of managers grows the efficiency loss goes to zero

on the efficiency of bertrand and cournot equilibria with product differentation in a differentiated products setting with n varieties it is shown under certain regularity conditions that if the demand structure is symmetric and bertrand and cournot equilibria are unique then prices and profits are larger and quantities smaller in cournot than in bertrand competition and as n grows both equilibria converge to the efficient outcome at a rate of at least 1n if bertrand reaction functions slope upwards and are continuous then even with an asymmetric demand structure given any cournot equilibrium price vector one can find a bertrand equilibrium with lower prices in particular if the bertrand equilibrium is unique then it has lower prices than any cournot equilibrium

note on a quantity discount pricing model to increase vendor profits monahan monahan james p 1984 a quantity discount pricing model to increase vendor profits management sci 30 june 720 726 develops a model for establishing an optimal quantity discount schedule from a vendor s viewpoint in this note we show that this model is limited to the case where the vendor buys from another supplier incorporating vendor s inventory carrying costs we develop a generalized version of monahan s model and demonstrate its equivalence with the joint economic lot size approach suggested by banerjee banerjee avijit 1986 a joint economic lot size model for purchaser and vendor decision sci 17 summer 292 311

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

relational incentives and moral hazard in teams this paper studies moral hazard in teams using a model where efforts are promoted via the combination of profit shares and relational contracts the focus is on how these two forms of incentives interact according to the degree of effort observability and the importance of future interaction the optimal allocation of profit shares can range from a wide dispersion across players to a full concentration of shares in the hands of a single player when shares are sufficiently concentrated the corresponding residual claimant can also adopt the role of administering all relational contracts therefore serving as an endogenously chosen principal copyright 2007 wiley blackwell

network models of spatial oligopoly with an application to deregulation of electricity generation because of the existence of transmission costs and significant scale economies in power production deregulation of electricity generation would lead to spatial oligopolistic markets this paper uses linear programs to obtain short run spatial price equilibria for a deregulated bulk power market in upstate new york these models unlike most previous models of imperfect competition capture spatial variations in production costs and demand functions we present two models one calculates a nash bertrand equilibrium in which each firm believes that rivals will not react to price changes this equilibrium represents the most intense level of competition to be expected the other model yields limit prices that are designed to discourage new firms from entering the market

a procurement decision support system in business volume discount environments emergence of a new discount pricing schedule called business volume discount becomes a major obstacle for procurement managers in finding the best purchasing strategy in the context of business volume discount a supplier offers discounts on total dollar amount of sales volume not on the quantity or variety of the products purchased from the supplier this paper describes a procurement decision support system pdss that has been successfully implemented to improve the purchasing activities of regional bell telephone companies in most purchasing operations a flexible procurement plan is considered a necessity because of the uncertainties associated with product demand and procurement budget pdss provides this flexibility by combining two different purchasing strategies purchasing on an annual commitment basis and on an as ordered basis although the development of the system is motivated by a particular application procurement of transmission plug in in one of the regional telephone companies the system is being used for a variety of procurement decisions involving business volume discount in the telecommunications industry the results of the implementation indicate that cost savings of up to 15 are achieved pdss use is not limited to the companies in the telecommunications industry the pdss model is applicable to any organization having a centralized procurement operation with business volume discount

mill pricing versus spatial price discrimination under bertrand and cournot spatial competition this paper asks two questions about spatial competition first does spatial price discrimination lead to lower prices and higher welfare than mill pricing if firms hold the bertrand conjecture the answer is yes for most values of fixed cost but for the cournot conjecture the opposite is true second does the introduction of space into the oligopoly models of bertrand and cournot change their results the answer is generally no however spatial bertrand prices exceed marginal cost unlike their spaceless counterparts these answers are obtained using models of spatial competition of which the cournot mill pricing models are new in spatial competition significant transport costs and economies of scale bestow market power upon firms this paper addresses two questions about spatial competition first does spatial price discrimination yield lower prices and higher social welfare producer plus consumer surplus than fo b mill pricing under spatial price discrimination differences in the delivered prices charged by a firm bear no necessary relationship to differences in transport costs in contrast a mill pricing firm sets a single price at its plant and customers bear the cost of transport this paper answers this question for the cases in which firms adopt the bertrand or cournot conjectures concerning how rivals will react to price and output changes this question is important because of the superficial appeal of mill pricing which stems from its imitation of the spatial structure of marginal costs the presence of spatial price discrimination by contrast is often considered to be evidence of the presence of market power at least in part for these reasons the us robinson patman antitrust act and great britain s price commission favor mill pricing nevertheless spatial price discrimination remains ubiquitous in the us europe and japan greenhut 1981 the second question is how does the introduction of space into the original oligopoly models of cournot and bertrand change their results cournot

entrepreneurs optimism and new venture performance a social cognitive perspective previous research indicates that entrepreneurs are generally high in dispositional optimism the tendency to expect positive outcomes even when such expectations are not rationally justified findings of the current study demonstrate a negative relationship between entrepreneurs optimism and the performance revenue and employment growth of their new ventures past experience creating ventures and industry dynamism moderated these effects strengthening the negative relationship between entrepreneurs optimism and venture performance these findings illustrate the benefits of applying a social cognitive perspective toward efforts to understand key aspects of the new venture creation and development process

competition of firms discriminatory pricing and location1 two costlessly mobile firms are to be located in a market region a subset of the plane the firms compete by setting locations and delivered price schedules to study this competitive stiuation an appropriate extensive form game is defined along with an appropri ate noncooperative solution concept existence and general properties of the equilibrium are demonstrated among the results are each firm increases its profit by locating so as to decrease total cost to both firms of serving the market firms will never locate coinciden tally if they have identical production costs and transport cost rates or if these are different and the firms are located in a circular market region having a uniform demand distribution this paper studies competition between two profit maximizing firms in space who are costlessly mobile and may discriminate in price we will allow the firms to set locations and delivered price schedules and we will be concerned with the existence and properties of equilibria in location and price starting with hotelling 9 the spatial competition literature has focused on location on bounded linear markets by two or more firms hotelling assumed identical firms that produced a single good with constant cost of production and considered consumers to be uniformly distributed and to have inelastic demand he also assumed that the consumers pay transport cost and purchase the good from the cheapest source hotelling claimed that a nash equilibrium in locations for the two firm market existed and yielded back to back locations at the center of the market many authors most recently d aspremont gabszewicz and thisse 2 have noted that an equilbrium in prices and location does not exist for hotelling s model however if the firms employ identical exogeneously specified prices hotelling s conclusions hold subsequent work by smithies 14 hartwick and hartwick 7 and eaton 3 claimed to show that a nash equi librium in f o b prices and locations can exist in markets with a uniform distribu tion of consumers each of whom have identical elastic demand functions for the two and three firm problems the work of d aspremont et al casts doubt on these conclusions without the adoption of restrictive conditions our work contrasts with these works and related research which has dealt with linear markets with uniform distributions of customers and with identical firms our work will involve markets that are subsets of the plane having nonuniform distributions of customers our firms will be allowed to be different that is have differences in production and transport costs however the fundamental difference in our approach is that our firms will set discriminatory prices and not price f o b in many ways our work will represent the discriminatory pricing