competitive coupon targeting with the advent of panel data on household purchase behavior and the development of statistical procedures to utilize this data firms can now target coupons to selected households with considerable accuracy and cost effectiveness in this article we develop an analytical framework to examine the effect of such targeting on firm profits prices and coupon face values we also derive comparative statics on firms optimal mix of offensive and defensive couponing the number of coupons distributed redemption rates face values and incremental sales per redemption among our findings when rival firms can target their coupon promotions at brand switchers the outcome will be a prisoner s dilemma in which the net effect of targeting is simply the cost of distribution plus the discount given to redeemers

pillage and property this paper introduces a class of coalitional games called pillage games as a model of hobbesian anarchy any coalition can pillage costlessly and with certainty any less powerful coalition power is endogenous so a pillage game does not have a characteristic function but pillage provides a domination concept that defines a stable set which represents an endogenous balance of power every stable set contains only finitely many allocations and can be represented as a farsighted core additional results are obtained for particular games including the game in which the power of each coalition is determined by its total wealth

customer and retailer rebates under risk aversion abstract in a supply chain setting we analyze a manufacturer s customer and retailer rebates which are sales incentives offered to the end buyers and retailers respectively the performance of both rebates is influenced by the retailer s objective and response to the promotion due to his intermediary position in the channel earlier studies investigating rebates in distribution channels have traditionally assumed that the retailer is risk neutral with the objective of maximizing expected profits in our paper we consider a risk averse retailer we formally model risk aversion by adopting the conditional value at risk cvar decision criterion using a stochastic and effective price dependent demand we analyze the manufacturer s rebate amount decisions and the retailer s joint inventory and pricing decisions in a game theoretical framework we provide several structural properties of the objective functions and show monotonicity of the retailer s decisions in the degree of risk aversion for the case of retailer rebates we characterize the unique equilibrium and for the case of customer rebates we prove the existence of an equilibrium using numerical examples we provide further insights on the impact of risk aversion for example given an exogenous wholesale price we observe a threshold value on the retailer s risk aversion parameter below above which the manufacturer is better off with retailer rebates customer rebates implying that the manufacturer s preferred rebate type can be different depending on whether the retailer is risk neutral or sufficiently risk averse

a note on the causality between export and productivity abstract in this paper we re examine the export led growth hypothesis through testing granger causality from exports to labor productivity using the methodology developed in toda and yamamoto 1995

managing strategic inventories via manufacturer to consumer rebates manufacturer to consumer rebates are a staple of modern supply chains such rebates are typically viewed as a means of price discrimination because of partial redemption by consumers however the proliferation of universally redeemed instant rebates suggests the practice may be motivated by additional considerations an issue we tackle in this paper our results demonstrate that consumer rebates can be particularly useful when a supply chain encounters inefficiencies stemming from strategic inventory buildup by retailers wary of high wholesale prices a retailer may hold excess inventory to convey a lower willingness to pay in future interactions and thereby strategically undercut future wholesale prices as a retaliatory consequence the manufacturer sets high near term wholesale prices the pull promotion from consumer rebates encourages more timely retail sales and in doing so undercuts but does not eliminate the retailer s strategic inventories in other words the introduction of consumer rebates can serve as an enticement for retailers to sell not just for consumers to buy perhaps surprisingly we find that the manufacturer retailer and consumers alike all benefit from the use of rebates this despite the fact that the manufacturer uses the rebates in self interest and as a strategic weapon this paper was accepted by yossi aviv operations management

is the export led growth hypothesis valid for canada empirical evidence linking exports to economic growth has been mixed and inconclusive this study re examines the export led growth elg hypothesis for canada by testing for granger causality from exports to national output growth using vector error correction models vecm and the augmented vector autoregressive var methodology developed in toda and yamamoto 1995 application of recent developments in time series modelling and the inclusion of relevant variables omitted in previous studies help to clarify the contradictory results from prior studies on the canadian economy the empirical results suggest that a long run steady state exists among the model s six variables and that granger causal flow is unidirectional from real exports to real gdp jel classification f43 c32 est ce que l hypothese de la croissance engendree par les exportations est valide pour le canada les resultats empiriques des etudes tentant de montrer le lien entre les exportations et la croissance economique sont mixtes et ne contiennent pas de resultats concluants cet article re examine l hypothese dans le cas du canada en testant la causalitea la granger pour les exportations et la croissance du produit national en utilisant les modeles vecm et la methodologie var developpes par toda et yamamoto 1995 l application de certains developpements recents dans l analyse des series chronologiques et l inclusion de variables pertinentes omises dans les etudes anterieures aident a mettre de l ordre dans les resultats contradictoires des etudes anterieures portant sur l economie canadienne les resultats empiriques suggerent qu un regime permanent existe entre les six variables du modele et que la causalitea la granger est unidirectionnelle des exportations reelles vers le pib reel

farsighted coalitional stability abstract i define the largest consistent set a solution concept which applies to situations in which coalitions freely form but cannot make binding contracts act publicly and are fully farsighted in that a coalition considers the possibility that once it acts another coalition might react a third coalition might in turn react and so on without limit i establish weak nonemptiness conditions and apply it to strategic and coalitional form games and majority rule voting i argue that it improves on the von neumann morgenstern stable set as it is usually defined but is consistent with a generalization of the stable set as in the theory of social situations journal of economic literature classification numbers c70 c71

bargaining in legislatures bargaining in legislatures is conducted according to formal rules specifying who may make proposals and how they will be decided legislative outcomes depend on those rules and on the structure of the legislature although the social choice literature provides theories about voting equilibria it does not endogenize the formation of the agenda on which the voting is based and rarely takes into account the institutional structure found in legislatures in our theory members of the legislature act noncooperatively in choosing strategies to serve their own districts explicitly taking into account the strategies members adopt in response to the sequential nature of proposal making and voting the model permits the characterization of a legislative equilibrium reflecting the structure of the legislature and also allows consideration of the choice of elements of that structure in a context in which the standard institution free model of social choice theory yields no equilibrium

pass through and consumer search an empirical analysis retail price pass through is one of the most important issues facing manufacturers of consumer packaged goods although retailers tend to pass higher wholesale prices through to consumers quickly and completely they often do not pass on trade promotions currently asymmetric pass through is commonly thought to result from retailers exercise of market power alternatively it may be because of consumer search behavior and retailers competitive response we test this theory using a panel threshold asymmetric error correction model applied to wholesale and retail scanner data for ready to eat cereal for a number of retailers in the los angeles metropolitan market we find that consumer search behavior contributes significantly to imperfect pass through by allowing pass through to depend on market power and consumer search costs we find results that are contrary to the conventional wisdom namely market power causes retail prices to fall quickly and rise slowly whereas consumer search behavior causes retail prices to rise quickly and fall slowly precisely the rockets and feathers phenomenon

slippage in rebate programs and present biased preferences present biased preferences capture the idea that individuals may find immediate payoffs significantly more salient than any future payoffs rather than simply discounting the future in a time consistent manner in this paper we show that consumers present biased preferences can generate slippage and we explore whether this can explain firms use of mail in rebates we assume that the consumer population comprises members who have various degrees of present bias the model demonstrates that if consumers have homogeneous willingness to pay for a product and thus rebates do not serve as a mechanism for traditional price discrimination rebates may still profitably exploit slippage but to do so they must generate very high slippage rates this is because the rebate must greatly exceed the price markup because the rebate must compensate consumers for the cost of redemption and the delay in receiving the rebate the ability of rebate programs to take advantage of present biased consumers is quite limited in settings where there is significant variance in the degree of present bias within the population unless the extent of consumers present bias is highly correlated with their rebate redemption costs

cyclic pricing by a durable goods monopolist in the model of this paper a monopoly seller of a durable good holds periodic sales as a means of price discrimination a new cohort of consumers enters the market in each period interested in purchasing the good either immediately or after a delay within each cohort consumers vary in their tastes for the good under broad conditions the seller will vary the price over time in most periods he will charge a price just low enough to sell immediately to consumers with a high willingness to pay periodically however he will drop the price far enough to sell to an accumulated group of consumers with a low willingness to pay

demand uncertainty and sales a study of fashion and markdown pricing the theory of clearance sales is expanded and applied to explain why markups markdowns and the frequency of sales of merchandise sold by department stores have increased dramatically in recent years and why they differ across merchandise groups tha major theme of the paper is that the growing role of fashion and product variety is an important reason for these increases and for the differences between merchandise groups the growing importance of fashion is illustrated by documenting the declining use of whites and the increasing use of colors and prints estimates of the effects of imports and technological and demographic changes on markups and markdowns are presented copyright 1988 by american economic association

on the condition for export led growth in this paper the author explores the conditions under which favorable export shocks produce export led growth in a three sector three factor general equilibrium model that allows for endogenous capital accumulation the export shock takes the form of either a resource discovery or an increase in the world market price of the export good while surprisingly simple conditions define the outcome in many cases there is no general presumption that an export boom will act as an engine of growth much depends on the precise structural characteristics of the economy

coalitional bargaining in networks we analyze a noncooperative bargaining game with a general coalition structure in each period an opportunity for a feasible coalition to form arises according to a stochastic process and a randomly selected agent in the coalition makes a take it or leave it offer to the other agents in the coalition we develop a new technique based on convex programming to characterize the unique stationary equilibrium payoff of the game we apply the framework to various settings including trading networks with middlemen and cooperation networks with overlapping communities in these applications feasible coalitions are determined by an underlying network structure we study the effect of the underlying network on the pattern of trade and show how an agent s payoff is related to her position in the network

a model of price promotions with consumer search this paper presents a price discrimination model of price promotions the distinguishing feature of our model is the explicit distinction between regular and promotional prices regular prices are chosen first then promotional prices further while regular prices are always available to everyone promotional prices are only available when offered and only to those who search for them we show that even a monopolist will offer random promotions under these circumstances furthermore as search costs increase the frequency and depth of promotions increase with competition for the promotion oriented consumers the seller becomes more aggressive in his promotional policies even more so as search costs increase the high reservation price consumers however end up worse off with competition

peak load pricing in competitive markets the paper offers an explanation for temporal price dispersion temporal price dispersion in the model is due neither to exogenous shifts in demand nor to price discrimination motives as shown in other papers in this paper the explanation relies on peak load pricing in the model presented consumers decide to purchase a given product in a certain time period according to the satisfaction they derive from the product at that time and to the prices and number of customers they expect at each firm and period the demand in each period is controlled by sellers through prices by offering different prices in different periods sellers motivate consumers to spread themselves across periods in a profitable way therefore the demand and price in each time period is determined endogeneously

the coalitional nash bargaining solution the coalitional nash bargaining solution is defined to be the core allocation for which the product of players payoffs is maximal we consider a non cooperative model with discounting in which one team may form and every player is randomly selected to make a proposal in every period the grand team consisting of all players generates the largest surplus but a smaller team may form we show that as players get more patient if an efficient and stationary equilibrium exists it must deliver payoffs that correspond to the coalitional nash bargaining solution we also characterize when an efficient and stationary equilibrium exists which requires conditions that go beyond the nonemptiness of the core

coordinating price reductions and coupon events abstract in this article the authors use an economic model to show that it may be optimal to lower the retail price during a coupon event when marginal consumers have moderate hassle costs of coupon redemption results from the model offer predictions on the relationships among coupon redemptions shelf price and coupon face value the authors test these predictions on a large data set of hundreds of coupon events across six packaged goods categories the data show that when a small coupon face value is offered the shelf price is likely to be reduced they also find that coupon efficiency increases when there is a lower retail price the results are of interest to managers planning a promotion calendar and deciding whether to coordinate price promotions with coupon events and they contribute to economic theory when a firm moves from uniform pricing e g no coupons to second degree price discrimination e g coupons all consumers may face a lower price this finding has public policy implication

the role of rebates in the hybrid competition between a national brand and a private label with present biased consumers abstract over the past years rebates have been increasingly used by national brand nb manufacturers conventional wisdom suggests that rebates are beneficial to firms as long as positive slippage exists based on the present biased preference theory we investigate the performance of nb rebates as a counterstrategy to the retailer s private label pl game theoretic models are developed to characterize channel dynamics involving consumers knowledge levels of the present biased preferences our model reveals multiple insights first a positive slippage rate does not necessarily benefit the nb manufacturer if the rebates fail to expand the demand of the nb second the retailer s commitment to the original nb price plays a positive role in improving the equilibrium profits of both parties third for loss averse consumers under preference uncertainties the nb manufacturer and the retailer prefer a low redemption cost in contrary to the conventional idea that sellers take advantage of consumers with high redemption costs

the structure of interdependence in international stock markets abstract this study investigates the dynamic structure of nine major stock markets using an error correction model and directed acyclic graphs dag the dag representation provides a structure of causality among these markets in contemporaneous time building on this contemporaneous structure and the estimated error correction model innovation accounting techniques are applied the results show that the japanese market is among the most highly exogenous and the canadian and french markets among the least exogenous in our nine market study the us market is highly influenced by its own historical innovations but it is also influenced by market innovations from the uk switzerland hong kong france and germany the us market is the only market that has a consistently strong impact on price movements in other major stock markets in the longer run

relicensing as a secondary market strategy secondary markets in the information technology industry where used or refurbished equipment is traded have been growing steadily for original equipment manufacturers oems in this industry the importance of secondary markets has grown in parallel not only as a source of revenue but also because of their impact on these firms competitive advantage and market strategy recent articles in the press have severely criticized some oems who are perceived to be actively trying to eliminate the secondary market for their products other oems have policies that enhance their secondary markets the goal of this paper is to understand how an oem s incentives and optimal strategies vis a vis the secondary market are shaped contingent on her relative competitive advantage product characteristics and consumer preferences the critical trade off that we examine is whether the indirect benefit from maintaining an active secondary market the resale value effect can outweigh the potentially negative effect of the sales of used products at the expense of new product sales the cannibalization effect to that end we develop a durable good model where the oem can directly affect the resale value of her product through a relicensing fee charged to the buyer of the refurbished equipment we analyze the oem s strategy in both the monopoly and the duopoly cases characterize the optimal relicensing fee set by the oem and draw conclusions on the conditions that favor stimulating or deterring the secondary market this paper was accepted by candace a yano operations and supply chain management

profitable pricing when market segments overlap in this paper we analyze profitable pricing strategies when market segments overlap overlapping markets are segments that are not perfectly sealed and leakage between them can occur different consumers are assumed to incur possibly different transaction costs if they choose to purchase in the low price market a monopolist seller knows the distribution of transaction costs across consumers and must choose an optimal pricing strategy in particular the monopolist must decide whether to charge a single price or to price differentiate conditions are derived under which price differentiation will be the most profitable strategy when price differentiation is optimal the equilibrium amount of leakage is determined endogenously unlike the standard economics textbook model of price discrimination in which zero leakage is determined exogenously and is usually given as a necessary condition for price discrimination we show that zero leakage is not necessary for differential pricing to be optimal and that

prices promotions and channel profitability was the conventional wisdom mistaken abstract because of the lack of empirical evidence supporting the shift of economic power from manufacturers to retailers it has been claimed that the conventional wisdom that retailers benefit more from the use of consumer promotions was mistaken this paper assesses this claim and examines how two different pricing approaches during manufacturers instant price promotions targeted at consumers impact on channel profits in a bilateral monopoly we found that manufacturers should only offer rebates when they keep their prior to promotion wholesale prices unchanged consistent with the conventional wisdom retailers do indeed take the lion s share of the promotion incremental profits surprisingly however we found that in the largest part of the parameter space manufacturers still earn more total channel profits than retailers over time the theoretical and managerial implications of these findings are discussed

history expectations and leadership in the evolution of social norms we study the evolution of a social norm of cooperation in a dynamic environment each agent lives for two periods and interacts with agents from the previous and next generations via a coordination game social norms emerge as patterns of behaviour that are stable in part due to agents interpretations of private information about the past influenced by occasional commonly observed past behaviours for sufficiently backward looking societies history completely drives equilibrium play leading to a social norm of high or low cooperation in more forward looking societies there is a pattern of reversion whereby play starting with high low cooperation reverts towards lower higher cooperation the impact of history can be countered by occasional prominent agents whose actions are visible by all future agents and who can leverage their greater visibility to influence expectations of future agents and overturn social norms of low cooperation

causality between export growth and industrial development empirial evidence from the nics abstract this paper investigates the causal relationship between export growth and industrial development in eight newly industrializing countries nics results of sims causality test show that for most of the nics there is a strong bidirectional causality between the growth of exports and industrial development these findings support the export led growth strategy in that expansion in exports not only promote the growth of national income but also lead to structural transformation of the developing countries

a theory of channel price promotions manufacturers can stimulate sales by a temporary wholesale price reduction for the retailer a rebate directed toward consumers or a combination of both the trade offs between these price promotions are analyzed providing insights about their roles profitability and welfare properties retailers rebates are also studied while price discrimination is a common explanation for rebates to consumers when a product is sold through a distribution channel the manufacturer may also use rebates to motivate retail participation in the promotion this explains why rebates may be offered even when all consumers use them and price discrimination does not occur copyright 1991 by american economic association

efficiencies without economists the early years of resale price maintenance resale price maintenance rpm continues to be a contentious topic both in economics and in antitrust during the 1980s economists derived new efficiency motivations for rpm while the supreme court reaffirmed the decades old per se ban on its use and congress threatened to extend that ban in the 1990s after several years of federal inactivity during the reagan administration the federal trade commission ftc has once again begun bringing rpm cases while economists have proposed a number of different efficiency explanations for rpm such theorizing has been performed largely without the help of businesses that actually use rpm with little practical evidence such hypotheses have been subject to substantial criticism of course since rpm has been per se illegal businesses may be reluctant to admit that they are engaged in the practice which would appear to be a necessary condition for generating an efficiency defense this article seeks to find out why businesses may believe that they benefit from rpm it does so by examining which efficiency rationales were advanced by firms during a critical time for rpm in the united states 1915 to 1917 these rationales drawn largely from previously unexplored materials are then examined in the light of current economic theory there are two basic sources for these rationales the first is three hearings on rpm held in 1915 1916 and 1917 in the u s house of representatives on a bill to legalize certain forms of rpm the second is the transcript of seven days of hearings the ftc held in 1917 to discuss efficiency motivations for rpm section ii explains several economic theories that have been posited for rpm and briefly discusses the critiques of these theories that have arisen in the legal and economic communities section iii examines federal rpm case law prior to 1918 and posits efficiency rationales from section ii to match the products involved in the case law section iii also discusses the uncertainty in the case law during the period 1908 to 1917 and the concepts behind the various judicial decisions section iv presents the efficiency arguments made during this period of legal uncertainty

when is price discrimination profitable we consider a general model of monopoly price discrimination and characterize the conditions under which price discrimination is and is not profitable we show that an important condition for profitable price discrimination is that the percentage change in surplus i e consumers total willingness to pay less the firm s costs associated with a product upgrade is increasing in consumers willingness to pay we refer to this as an increasing percentage differences condition and relate it to many known results in the marketing economics and operations management literatures

the timing of sales this paper presents a model of intertemporal price discrimination a fixed number of sellers produce a homogeneous good consumers with different preferences enter the market in each period and leave when they make a purchase the sellers typically vary their prices over time charging a high price in most periods but occasionally cutting the price to sell to a large group of customers with a low reservation price in some equilibria all stores lower their price at the same time and to the same level

loss leader pricing and rain check policy loss leader pricing and rain check policies are common in retail markets yet research on these topics is surprisingly scarce in this paper we study the effects of leader pricing and rain check policy on stores profits and market outcomes suppose stores can accurately predict demand might they still run out of stock we investigate whether such a result is plausible when stores can offer rain checks the paper also helps resolve an issue that has recently attracted much attention should the ftc repeal its rule prohibiting stock outs of advertised sale items

price discrimination through a distribution channel theory and evidence price discrimination practices are common but they typically are analyzed in a framework in which firms sell directly to end users louis phlips 1981 richard schmalensee 1981 hal varian 1985 gerstner and holthausen 1986 this direct channel framework is valid for service industries such as entertainment and travel where senior citizens buy reduced price tickets to musical concerts and children receive discounts on airfares and movietheater tickets in the packaged goods and durable goods industries however manufacturers sell to retailers who sell to consumers in indirect channels like these price discrimination occurs when manufacturers target pull discounts1 to price conscious consumers in the form of coupons and rebates consumers who do not use these discounts pay higher net prices because manufacturers cannot dictate consumer prices to retailers analysis of price discrimination ought to take into account the pricing behavior of retailers michael katz 1987 gerstner and hess 1991 while some researchers have studied coupons as a means for price discrimination william levedahl 1984 chakravarthi narasimhan 1984 they have done so in a direct channel context and have ignored the role of retailers or other middlemen in the pricing and couponing process in this paper we study price discrimination within a channel of distribution consisting of a single manufacturer and competitive retailers in the model the manufacturer pricediscriminates using a pull discount targeted at consumers with low reservation prices to reduce the net price these consumers pay for the product some consumers with higher reservation prices who self select not to use the discount pay the full retail price for the product the manufacturer chooses the wholesale price for the firm s product and the size of the price discriminating pull discount taking as given the markup percentage used by retailers joint determination of the manufacturer discount and retail markup is also considered the paper s major finding is that a higher retail markup percentage influences the manufacturer to use price discrimination in a less intensive way i e to reduce the size of the equilibrium pull discount as well as the wholesale price the intuition behind this result is as follows the greater the retail markup percentage for a given wholesale price the greater will be the retail price the greater the retail price the larger the pull discount will have to be to keep the low reservation price consumers in the market but the manufacturer bears the entire cost of the discount and a larger discount induces more nontargeted customers to use it these two effects make price discrimination less profitable when markup percentage increases so the manufacturer reduces its pull discount and in gerstner graduate school of management university of california davis ca 95616 and department of economics haifa university haifa 31999 israel hess department of business administration university of illinois champaign il 61820 holthausen department of economics north carolina state university box 7507 raleigh nc 27695 we thank alastair hall jeongwen chiang randy cooke and nick ruotolo for their comments and assistance 1manufacturers who distribute products through retailers use push or pull techniques to increase sales under push manufacturers offer inducements to retailers when consumers shop for the product the retailer has an incentive to promote the brand thus pushing it through to consumers under pull manufacturers offer incentives such as coupons or rebates directly to consumers the manufacturers hope that demand will be pulled through the channel by consumers asking retailers for the promoted brand

a noncooperative theory of coalitional bargaining the authors explore a sequential offers model of n person coalitional bargaining with transferable utility and with time discounting their focus is on the efficiency properties of stationary equilibria of strictly superadditive games when the discount factor delta is sufficiently large it is shown that delay and the formation of inefficient subcoalitions can occur in equilibrium the latter for some or all orders of proposer however efficient stationary equilibrium payoffs converge to a point in the core as delta approaches one strict convexity is a sufficient condition for there to exist an efficient stationary equilibrium payoff vector for sufficiently high delta

vertical price leadership on local maize markets in benin abstract this paper considers vertical price relationships between wholesalers and retailers on five local maize markets in benin we show that the common stochastic trend and the long run disequilibrium error must explicitly be considered to correctly interpret the restrictions on the error correction structure in terms of economic power in the channel interesting differences between markets are found in the two major towns retailers play a more prominent role in the price formation process than generally assumed in the literature on development economics in the two larger rural centers however wholesalers involved in arbitrage among urban markets do influence price formation

rebates inventories and intertemporal price discrimination richard p saba we demonstrate that universally redeemed rebates can increase manufacturer profits by reducing the incentives of downstream retailers to hoard inventories when optimal wholesale prices vary predictably over time by bypassing retailers and making direct contracts with buyers the manufacturer can increase the variations in effective prices paid by consumers without concomitantly creating larger incentives for retailers to hold inventories during profitable high demand periods manufacturer revenues are ordinarily constrained by competition from retailer inventories thus limiting profits however by selectively offering rebates to consumers while maintaining high wholesale prices low demand periods can be accommodated without inducing retailer hoarding jel d4 l1 general motors corp is emptying its bag of marketing tricks in an all out effort to force its u s market share back up to 30 of light vehicle sales that is good news for gm customers because the manufacturer is offering financing at less than 1 or cash rebates of as much as 3 000 a vehicle wall street journal sept 16 1998 i introduction we tackle a fundamental economic question if general motors or any manufacturer wants to increase unit sales why does the necessary price cut occur indirectly in the form of a rebate it is well known that in cases of perfect competition or monopoly a tax or subsidy on buyers is equivalent to the same tax or subsidy on sellers in that each leads to the same net prices and the same equilibrium quantities a rebate is effectively a subsidy offered to the buyer whereas a cut in the wholesale price is effectively a subsidy to the seller under conditions of perfect competition or monopoly a manufacturer should be able to achieve identical outcomes in either of the two ways the challenge is to explain why rebates or coupons are used redemption of coupons and rebates is costly to both consumers and issuers while a price cut of equivalent size can be implemented at a much lower cost one would expect the price reduction strategy to dominate the strategy of issuing coupons or rebates to all buyers yet it apparently does not throughout the 1990s for example chrysler ford and general motors consistently offered a more extensive array of consumer oriented indirect price cuts via rebates than dealer incentive programs 1 the most common explanation for the use of rebates and coupons is that they enable either manufacturers or retailers who possess some monopoly power to engage in third degree price discrimination 2 consumers whose reservation prices lie below the price charged by the manufacturer or retailer are induced to purchase the item by a sufficiently large rebate or coupon yet certain aspects of the practice of offering coupons and rebates are inconsistent with the standard price discrimination explanation rebates often are given automatically to all customers at the time of purchase purchasers of automobiles and other big ticket items are given the option of applying the rebate to their down payment or receiving the cash as noted by hanley 1987 and higgins 1989 sellers of less costly items recenfly have started providing instant rebates or on package coupons which can easily be used by all buyers at the time of purchase these innovations have dramatically lowered redemption costs for consumers and boosted redemption rates 3 moreover bowman 1980 demonstrates that holding redemption costs constant there is a positive relationship between the size of the coupon rebate and the likelihood of consumer redemption the implication of this empirical regularity is expressed succinctly by gerstner and hess 1991b p 5 while price discrimination is a reasonable exp lanation for cents off coupons for dollars off rebates such as those given by manufacturers of household appliances it is not

coalition bargaining in repeated games we consider an intertemporal game theoretic framework in which different coalitions interact repeatedly over time both the terms of trade and the endogenous cooperation structure arising in this setup are characterized in a protocol free manner provided that just three natural conditions on the outcome are satisfied c1 a coalition is formed with positive probability if and only if the shares obtained in this case by its members weakly exceed their respective share expectations c2 each matched coalition distributes the entire surplus among its members c3 members of any coalition are treated symmetrically with respect to their share expectations when the surplus of this coalition is distributed our analysis primarily focuses on the limit scenario where the game ends each date with vanishing probability we show that in this case the cooperation structure and the shares are unique in an application to trade networks we show that in a complete network a unique price arises and agents specialize in either buying or selling in an incomplete network on the other hand transactions occur generally at multiple prices and some agents become arbitrageurs that buy and sell at different prices

theoretical models of sales promotions contributions limitations and a future research agenda our objective in this paper is to review theoretical models of sales promotions we highlight the key contributions of these models discuss their limitations and outline an agenda for future research managerial questions examined in these models include some very fundamental issues such as why firms resort to the use of sales promotions in mature markets and why the use of sales promotions has increased dramatically during the last two decades also included in this review are models that address firm level strategic issues such as the allocation of dollars between advertising and sales promotions and the relative emphasis on trade promotions vis a vis consumer promotions we also review theoretical models that explain how consumers respond to price promotions and what type of sales promotion tools may be superior to others in a particular market the review concludes with a possible agenda for future research

dealing temporary price cuts by seller as a buyer discrimination mechanism this paper is concerned with temporary price cuts deals sales and specials as a mechanism for the seller to price discriminate between buyers with different intensities of demand we analyze why a seller offers such price cuts which buyers take advantage of them and what the parameters are that determine the amount and frequency of the discount offered in the remainder of this section we briefly review the literature on price deals 1 in section ii simple models of buyer and seller behavior are developed and we show why and how a seller adopts a dealing strategy section iii summarizes the key implications of the model and indicates how the price discrimination hypothesis could be tested in practice section iv suggests possible extensions of the model finally section v gives our conclusions in the marketing literature the issue of who is deal prone has been extensively researched an explanation for temporary price cuts usually called deals sales or specials is provided we hypothesize that they are a mechanism that discriminates between more intense and less intense demanders we further hypothesize a positive relationship between demand elasticity and holding costs buyers with more intense demand with high holding costs are those who will be buying the product at its regular price the low holdingcost buyers take advantage of deals by forward buying the model is applicable to three relationships 1 manufacturer reseller where the reseller may be a wholesaler or a retailer 2 resellerreseller for example wholesaler retailer and 3 retailer consumer we are grateful to michael mussa and albert madansky for their comments we also benefited from comments made by the marketing faculty of the wharton school at a seminar where an earlier version of this paper was presented neil beckwith in particular is acknowledged 1 for a more detailed review of deals and similar pricecutting mechanisms e g mail in rebates cents off labels coupons etc see narsimhan 1982 chan 2 journal of business 1985 vol 58 no 3 1985 by the university of chicago all rights reserved 0021 9398185 5803 0004 01 50

creating win win trade promotions theory and empirical analysis of scan back trade deals manufacturer trade promotion spending is second only to cost of goods sold as a profit and loss item yet manufacturers often lose money on these deals as a result of forward buying by retailers the search for more effective forms of trade promotion and the availability of scanners at cash registers has led to the emergence of a new type of trade deal the scan back that gives retailers a discount on unitssoldduring the promotion rather than on unitsbought we develop a theory to compare retailer pricing decisions and profitability under scan back and traditional off invoice trade deals we show that when the terms of the trade deal are identical retailers prefer off invoice trade deals and manufacturers prefer scan backs manufacturers can however redesign the scan back to leave the retailer weakly better off and leave themselves strictly better off using proprietary data from the beverage category we conduct an empirical analysis and find that during the promotion period scan back trade deals relative to off invoice deals 1 do not cause excess ordering and 2 generate higher retail sales through lower retail prices implications for researchers and managers are discussed