optimal shared savings contracts in supply chains linear contracts and double moral hazard in many supply chains consumption of indirect materials sold by a supplier to a customer for use in her production process can be reduced by efforts exerted by either party since traditional supply contracts provide no incentive for the supplier to exert such effort shared savings contracts have been proposed as a way to improve incentives in the channel leading to more efficient effort choices by the two parties such shared savings contracts typically combine a fixed service fee with a variable component based on consumption volume we formalize this situation using the double moral hazard framework in which both parties decide how much effort to exert by trading off the cost of their effort against the benefits that they will obtain from reduced consumption we also extend the double moral hazard framework to analyze a broader class of cost of effort functions than considered so far including the linear cost of effort functions commonly found in practice we show that the supplier can still always induce the optimal second best equilibrium with a linear shared savings contract under this broader class of functions however the behavior of the optimal contract as a function of the problem parameters becomes more complex we illustrate how small changes in the problem parameters can turn profits from being a well behaved to a poorly behaved function of the contract and provide some theoretical characterization of this phenomenon the practical significance of this is that simple linear contracts are sufficient in many double moral hazard contexts even for the broader class of functions we consider but care must be taken in selecting the optimal contract parameters

flexibility and uncertainty the preserving of flexibility when faced with uncertainty is a neglected aspect of behaviour under risk yet it is an important factor in decisions to hold liquid assets or delay irreversible investment this paper formalizes the notion of flexibility in a sequential decision context and relates its value to the amount of information an agent expects to receive a rudimentary money demand model is developed embodying these ideas and the history of flexibility as an economic concept is traced choices are frequently made between alternatives that imply different degrees of future commitment between a short term investment that leaves future options open for example and a long term one that by its very nature forecloses those options the relative attractiveness of the two depends on their probability distributions of payoffs over time a basic consideration in this choice is the recognition that beliefs about the risks governing these payoffs may change current doubts may be partially resolved in the near future this prospect decreases the attractiveness of the longer term commitment in that one is able to respond less fully to new information and even if it does not directly affect the risks associated with shorter term choices enhances their appeal this paper formalizes the above remarks by establishing connections between the following two partial orderings the first is an ordering based on variability of beliefs one set of beliefs is more variable than another if more final risk is resolved at an intermediate stage the more one expects to learn by an intermediate period relative to what one knows today the more variation one is anticipating in beliefs about the final outcome the second is an ordering of current actions or positions based on flexibility one position is more flexible than another if it leaves available a larger set of future positions at any given level of cost these two orderings are incorporated in a simple sequential decision model to suggest the following behavioural principle the more variable are a decision maker s beliefs the more flexible is the position he will choose this principle potentially applies whenever i there will be opportunities to act after further information is received and ii current actions influence either the attractiveness or availability of different future actions

from a systematic literature review to integrated definition for sustainable supply chain innovation ssci publisher elsevier articletitle from a systematic literature review to integrated definition for sustainable supply chain innovation ssci journaltitle journal of cleaner production articlelink http dx doi org 10 1016 j jclepro 2016 11 153 content type article copyright 2016 elsevier ltd all rights reserved

product market imperfections and loan commitments i show in a model of competitive banks that the characteristics of loan contracts are affected by product market imperfections in the borrower s industry a bank loan commitment increases the value of a borrower firm operating in an imperfectly competitive industry and thus dominates a simple loan even in the absence of risk sharing considerations and informational asymmetries between the borrower and the bank while it is individually rational for a firm to obtain a loan commitment all the firms in that industry taken together are made worse off by the existence of loan commitments a loan commitment is a contract guaranteeing future availability of credit to a borrower at a prespecified fixed or stochastic interest rate although bank loan commitments are an important financial instrument and there exists an extensive literature analyzing them the rationale for their existence is still a matter of research this paper provides an explanation for the existence of bank loan commitments to borrowers from industries in which there is imperfect competition in the product market it is shown that in such industries the option to acquire financing at predetermined rates enhances the borrower s strategic power and thus creates value for the individual borrower consider an industry with imperfect competition where firms face the problem of noncooperatively exploiting a product market opportunity the optimal product market strategy of a firm depends on the output of its rivals a firm with access to resources at a lower marginal cost than its competitors has a strategic advantage that it can exploit to gain a larger market share and profits it is shown here that a firm that does not have such a strategic advantage can create it by purchasing for a fixed initial fee an option to acquire a factor of production such as financing at favorable terms specifically by initially negotiating a bank loan commitment the firm can finance an expansion of output to meet a strategic contingency at more favorable terms than would be possible if the expansion had to be financed in the spot market the ability to exercise the commitment enables the firm to threaten its rivals strategically and moves the industry to an equilibrium more favorable to that firm thus creating value for the borrower it is shown below that it is optimal for all firms to acquire bank loan commitments altering the industry equilibrium in the process

evaluating natural resource investments notwithstanding impressive advances in the theory of finance over the past 2 decades practical procedures for capital budgeting have evolved only slowly the standard technique which has remained unchanged in essentials since it was originally proposed see dean 1951 bierman and smidt 1960 derives from a simple adaptation of the fisher 1907 model of valuation under certainty under this technique expected cash flows from an investment project are discounted at a rate deemed appropriate to their risk and the resulting present value is compared with the cost of the project this standard textbook technique reflects modern theoretical developments only insofar as estimates of the discount rate may be obtained from crude application of single period asset pricing theory but see brennan 1973 bogue and roll 1974 turnbull 1977 constantinides 1978 the inadequacy of this approach to capital budgeting is widely acknowledged although not widely discussed its obvious deficiency is its the evaluation of mining and other natural resource projects is made particularly difficult by the high degree of uncertainty attaching to output prices it is shown that the techniques of continuous time arbitrage and stochastic control theory may be used not only to value such projects but also to determine the optimal policies for developing managing and abandoning them the approach may be adapted to a wide variety of contexts outside the natural resource sector where uncertainty about future project revenues is a paramount concern

bureaucratic behavior modeled by reduced rank regression the case of expenditures from the soviet state budget abstract a bureaucratic hierarchy compresses information flowing upward and disaggregates directives passing downward thus making itself amenable to modeling by reduced rank regression applying this technique to the soviet government we find that about eight latent variables are required to characterize the mapping of predetermined variables into a vector of budgetary expenditures the latent variables can be interpreted as targets for expenditures in high priority sectors

risk sharing and information revelation mechanism of a one manufacturer and one retailer supply chain facing an integrated competitor this paper develops an information revelation mechanism model of a one manufacturer and one retailer supply chain facing an outside integrated competitor under demand uncertainty we investigate how the manufacturer designs a wholesale price order quantity contract to induce the retailer to report his risk sensitivity information truthfully we try to explore the effects of the outside competitor and the risk sharing rule on the optimal price service level decisions of the retailer and the optimal wholesale prices of the manufacturer we find that the strategic interaction plays an important role in the effect of risk sensitivity on the order quantity for the retailer when the fraction of the risk cost shared by the manufacturer is sufficiently large small the optimal wholesale price for the high risk averse retailer is higher lower than that for the low risk averse retailer

flexible and risk sharing supply contracts under price uncertainty we study supply contracts for deterministic demand but in an environment of uncertain prices we develop valuation methodologies for different types of supply contracts a time inflexible contract requires the firm to specify not only how many units it will purchase but also the timing of the purchase a time flexible contract allows the firm to specify the purchase amount over a given period of time without specifying the exact time of purchase other than time flexibility the suppliers may offer quantity flexibility to the firm as well i e purchase quantities could be within a prespecified quantity window finally risk sharing features can be incorporated in the contract in terms of the purchase price that the firm eventually pays to a supplier within a prespecified price window the firm pays the realized price but outside of it the firm shares in an agreed way added costs or benefits given the structure of a supply contract we study the firm s decision when to purchase and how many units in each purchase such that the expected net present value of the purchase cost plus inventory holding cost is minimized we discuss optimal purchasing strategies for both time flexible and time inflexible contracts with risk sharing features other interesting results include the analysis of two supplier sourcing environments and the exploitation of quantity flexibility in such contracts our discussion illustrates how time flexibility quantity flexibility supplier selection and risk sharing when carefully exercised can effectively reduce the sourcing cost in environments of price uncertainty

strategic commitment to price to stimulate downstream innovation in a supply chain abstract it is generally in a firm s interest for its supply chain partners to invest in innovations to the extent that these innovations either reduce the partners variable costs or stimulate demand for the end product they will tend to lead to higher levels of output for all of the firms in the chain however in response to the innovations of its partners a firm may have an incentive to opportunistically increase its own prices the possibility of such opportunistic behavior creates a hold up problem that leads supply chain partners to underinvest in innovation clearly this hold up problem could be eliminated by a pre commitment to price however by making an advance commitment to price a firm sacrifices an important means of responding to demand uncertainty in this paper we examine the trade off that is faced when a firm s channel partner has opportunities to invest in either cost reduction or quality improvement i e demand enhancement should it commit to a price in order to encourage innovation or should it remain flexible in order to respond to demand uncertainty we discuss several simple wholesale pricing mechanisms with respect to this trade off

a comparison of milestone based and buyout options contracts for coordinating r d partnerships we analyze optimal contractual arrangements in a bilateral research and development r d partnership between a risk averse provider that conducts early stage research followed by a regulatory verification stage and a risk neutral client that performs late stage development activities including production distribution and marketing the problem is formulated as a sequential investment game with the client as the principal where the investments are observable but not verifiable the model captures the inherent incentive alignment problems of double sided moral hazard risk aversion and holdup we compare the efficacy of milestone based options contracts and buyout options contracts from the client s perspective and identify conditions under which they attain the first best outcome for the client we find that milestone based options contracts always attain the first best outcome for the client when the provider has some bargaining power in renegotiation and identify their applicability to different r

contestable markets under uncertainty in this article we present a model of a market which is ex post contestable we show that in a market characterized by uncertainty a firm will face a tradeoff between efficiency and flexibility and generally will make some precommitments to take advantage of ex ante technologies we show that in the face of potential entry the incumbent will increase his precommitments and in so doing will affect the probability of entry the degree of market contestability is therefore endogenously determined by the choice of precommitments the extent to which precommitments will be used to affect entry probabilities is shown to depend on the efficiency of ex ante production adjustment costs and the degree of uncertainty in particular we show that the market becomes more contestable as the relative efficiency of ex post production increases and as market conditions become more uncertain

models and estimation of disequilibrium for centrally planned economies the planned level of output is an important variable in modelling centrally planned economies and the present paper discusses several disequilibrium models in which the plan level is an endogenous variable a key relationship in such a model is the plan adjustment equation which is the counterpart of the usual priceadjustment equation employed in models of free economies seemingly minor differences in assumptions lead to markedly different econometric models the coherency properties of these are studied and several likelihood functions are derived the most complex of the models includes both endogenous plan levels and endogenous prices

being a leader or a follower this paper deals with the analysis of conflicts in duopoly situations in particular with the distribution of roles in the von stackelberg framework which firm will be the leader which firm the follower under what circumstances will firms find a mutually advantageous distribution of roles will they fight for leadership or followship in von stackelberg s analysis of duopoly either firms do not choose their respective roles or they fight for leadership this situation is due to the particular strategy space namely the quantity to produce of an homogeneous good we extend here the strategy space to price quantity pairs we show that if costs are identical or similar then both firms will prefer the role of follower if there is a significant cost differential between the firms then the non cooperative equilibrium can only be of two types either the less efficient firm will act as the leader selling a limited quantity at a low price and the more efficient firm as the follower selling to the residual demand at a higher price or the more efficient firm acting as leader will drive the less efficient firm out of the market by adopting a limit pricing strategy but in so doing that firm makes less profits than if it acts as follower we suggest that it is not unreasonable to expect that firms in a duopoly framework will tend to coordinate on their mutually advantageous role distribution even if they compete in a non cooperative strategic way in terms of both prices and quantities

on the nash bargaining solution with noise abstract suppose two parties have to share a surplus of random size each of the two can either commit to a demand prior to the realization of the surplus as in the nash demand game or remain silent and wait until the surplus was observed adding the strategy to wait results in two strict equilibria in each of which one player takes almost the whole surplus provided uncertainty is small if commitments concern only who makes the first offer the more balanced nash bargaining solution is approximately restored in all cases commitment occurs in equilibrium despite the risk of breakdown of negotiations

co determination and innovation this paper examines the effect of the german co determination law of 1976 mitbestg on the innovative activity of german firms co determination applies to firms with 2 000 employees or more data from 1971 1976 and 1981 1990 on 148 firms are used to compare the number of patents granted to co determined firms before and after the introduction of the law several control variables are applied and in particular in order to avoid a possible bias from specific effects of firm size we compare the co determined firms with others before and after 1976 the results do not support the view that co determination slows down technological progress and reduces innovativity

supply chain coordination with downstream operating costs coordination and investment to improve downstream operating efficiency abstract we endow the downstream firm in a supply chain with operating costs in addition to the traditional overage and underage costs we reanalyze lariviere and porteus s selling to a newsvendor model 2001 allowing for non linear production costs and provide comparative statics we then explore investment in reducing downstream operating costs to overcome the fact that investment is lower in a decentralized chain than in an integrated one we propose several coordination mechanisms buybacks revenue sharing and operating subsidy with a license fee

russian voting and the initial economic shock of hyperinflation this paper addresses the issue of economicvoting in transitional democracies using data from the russianfederal elections it argues that the shock of inflation thatfollowed the fundamental economic reform has a lastinginfluence on voters specifically it shows that in russia where inflationary policy led to hyperinflation and thewidespread loss of personal savings the magnitude of savingslost at that time continues to explain a significant portionof the variation in the regional support for the communistparty in parliamentary and presidential elections

innovation and technology diffusion in competitive supply chains abstract innovations in consumer products frequently rely on technological advances across multiple tiers in a supply chain considering the consumer market demand and downstream investment conditions as input we model a game in a two tier supply chain where downstream firms choose to adopt different levels of an upstream technology and an upstream technology leader determines its pricing policy we identify two necessary but distinct elements for the successful development adoption and diffusion of upstream technologies that are sold to lower tiers as components within final products 1 the level of technology demanded by the market we develop a measure technological potential which describes the highest level of an upstream technology demanded by consumer markets 2 a sufficiently rich return to an upstream innovator as a function of different levels of technology from these two elements we show that the relative magnitudes of two competing sets of consumer market factors determine the technological potential whereas the overall magnitude of the factors in both sets determines the return to the upstream developer we discuss how this difference in consumer market factors influence on these two elements may determine how different technologies fare in the supply chain our results have managerial implications for investors in research and development project selection in identifying profitable technologies that are also demanded at higher capability levels and for governments in defining more targeted public policies for example in choosing the right tier of a supply chain to provide subsidies to encourage market support for certain technologies

characteristics of patent litigation a window on competition we examine the patenting behavior of firms in an industry characterized by rapid technological change and cumulative innovation recent survey evidence suggests that semiconductor firms do not rely heavily on patents to appropriate returns to r d yet the propensity of semiconductor firms to patent has risen dramatically since the mid 1980s we explore this apparent paradox by conducting interviews with industry representatives and analyzing the patenting behavior of 95 u s semiconductor firms during 1979 1995 the results suggest that the 1980s strengthening of u s patent rights spawned patent portfolio races among capital intensive firms but it also facilitated entry by specialized design firms copyright 2001 by the rand corporation

on the meaning of aggregate excess supply and demand for consumer goods in soviet type economies this paper discusses the policy relevance of a pure macroeconomic approach towards the problem of disequilibrium on the consumer good market in the traditional soviet type economies it is argued that when fixed distorted relative prices create both excess demands and excess supplies on the micromarkets and if such a situation must absolutely be characterized in terms of aggregate excess supply excess demand or equilibrium then in view of the possible policy implications of this characterization it is generally in the interest of the consumers that the planners perceive it as a situation of aggregate excess demand copyright 1990 by oxford university press

strategizing niceness in co opetition the case of knowledge exchange in supply chain innovation projects abstract in this paper we take a novel approach to address the dilemma of innovation sharing versus protection among supply chain partners the paper conducts an exploratory study that introduces factors affecting a firm s optimum supply chain innovation strategy we go beyond the conventional prisoners dilemma with its limiting assumptions of players preferences and symmetry to explore a larger pool of 2 2 games that may effectively model the problem after classifying firm types according to collaboration motive and relative power we use simulation to explore the effects of firm type opponent type and payoff structure on repeated innovation interactions or equivalently long term relations and optimality of niceness surprisingly we find that opponent type is essentially irrelevant in long term innovation interactions and focal firm type is only conditionally relevant the paper contributes further by introducing reciprocation of strategy type nice versus mean showing that reciprocation is recommended while identifying and explaining the exceptions to this conclusion

repressed inflation in the soviet union a temporary equilibrium approach abstract the soviet economy is modeled by means of temporary general equilibrium theory three temporary equilibrium states are distinguished in walrasian equilibrium all markets clear under repressed inflation there is excess consumer demand for goods marketed by the state while consumer demand is deficient in the underconsumption regime the dynamics of these temporary equilibrium states are studied and the dynamic adjustment equations fitted to soviet data simulation of the model offers an explanation for the tendency of the inventories cash balances ratio to fall since 1965

socialist economics the disequilibrium school and the shortage economy the economics literature about behavior and policy in the stylized socialist economy has passed through three main phases the first phase emanated essentially from the barone lange von mises debate before world war ii its main focus was on how a socialist economy could operate efficiently in the absence of markets and private property the second phase occurring mostly since world war ii has been concerned primarily with coming to grips with the organization institutions and planning process of economies that profess to have realized some form of the ideal socialist economy several writers have sought to generalize on the basis of these empirical features without really aiming at a rigorous formal theory of the various agents in a centrally planned economy the third phase has occurred since the mid 1970s when some began to work out propositions on and formalize models of micro and macroeconomic behavior in stylized centrally planned economies and sought to buttress their theoretical approach with macroeconometric measurements that have since been used as a platform for formulating policy recommendations there have been three main strands in this third type of inquiry ickes 1984

endogenously determined price setting monopoly in an exchange economy abstract this note describes a noncooperative game in an exchange economy in which the players are strategically symmetric a price setting monopoly is a unique sequentially rational nash equilibrium of that game and the price setting monopolist emerges endogenously

contracting for technology improvement the effect of asymmetric bargaining power and investment uncertainty abstract investment in technology improvement ti measures that reduce the consumption rate of input commodities like fuel energy water etc yields significant economic and sustainability benefits yet evidence shows that the so called holdup problem leads to inefficient levels of investment in ti the suppliers refrain from investing in ti because they fear that a buyer with greater bargaining power will use ti related cost reductions to push prices down in the purchase bargaining process and thereby further reduce the supplier s profit margin conventional wisdom suggests that higher bargaining power on the buyer s side aggravates this problem in a two tier supplier buyer setting we study the role of relative bargaining power along with technology uncertainty i e the risk associated with investment return on ti investment levels by the supplier we challenge conventional wisdom to show that there is an inverse u shaped relationship between buyer bargaining power and ti investment by the supplier and characterize how technology uncertainty moderates this relationship we study and rank various contracting arrangements commonly used in industry including the price commitment and shared investment contracts to remedy the investment inefficiencies resulting from the bargaining process

pre commitment and flexibility abstract this paper considers several related strategic duopoly settings in which uncertainty creates an option value from retaining flexibility by delaying investment or output decisions until after uncertainty is resolved this value of flexibility must be weighed against the strategic value of pre commitment yielding a trade off between flexibility and pre commitment we obtain a simple characterization of the timing of output decisions as a consequence of the degree of uncertainty particular attention is paid to the implications for entry deterrence by an incumbent firm and to the possible flexibility enhancing effects of investment in capital

strategic spillovers and incentives for research and development this paper develops a model in which a monopolist supplier can contribute to downstream product improvements by creating knowledge spillovers which downstream firms use as a substitute for their own r d efforts although a market for r d information does not exist the supplier may appropriate an indirect return on r d for two reasons sufficiently high levels of spillover information lead to greater downstream product quality and spillover information reduces the equilibrium sunk cost of r d for downstream firms and thus facilitates entry both effects cause an expansion of downstream output and enhance the demand for the supplier s intermediate good given sufficiently strong incentives for supplier r d the locus of r d shifts partially from the downstream to the upstream industry r d expenditures technological opportunities and downstream industry structure are determined endogenously weak appropriability conditions in the downstream industry enhance innovation incentives in the supply sector

comparing firms triadic patent applications across countries is there a gap in terms of r d effort or a gap in terms of performances abstract this paper addresses the question of national differences as regard the number of triadic patents applied for by inventors from several oecd countries the key idea is to determine whether such differences should be attributed to differences in r d expenditures or rather to some other reasons mainly institutional or behavioural ones with this aim in view both a macro economic analysis based on aggregate data for triadic patent counts and r d expenditures and a micro economic analysis based on firms data from three selected sectors are performed in both cases the methodological focus is made on the introduction the definition and the estimation of a national index of relative efficiency in standard count data models the main empirical findings are that there is a strong heterogeneity in terms of performance among european countries and a strong intra country heterogeneity among sectors this suggests that in the field of innovation policies there is a need for tailored solutions reflecting the specificities of each innovation system moreover we show that european countries over perform the united states in some high tech sectors where the leadership of american firms is traditionally alleged whereas european firms fail to keep up in more traditional sectors

shared savings contracts for indirect materials in supply chains channel profits and environmental impacts there are many materials for which the quantity needed by a firm is at best indirectly related to the quantity of final product produced by that firm such as solvents in manufacturing processes or office supplies for any such indirect materials an inescapable incentive conflict exists the buyer wishes to minimize consumption of these indirect materials while the supplier s profits depend on increasing volume both buyer and supplier can exert effort to reduce consumption hence making the overall supply chain more efficient however no supplier will voluntarily participate unless contract terms are fundamentally revised this can be done through a variety of shared savings contracts where both parties profit from a consumption reduction this paper analyzes several such contracts currently in use for chemicals purchasing we show that such contracts can always increase supply chain profits but need not lead to reduced consumption we analyze equilibrium effort levels consumption and total profits and show how these change with the contract parameters we find that the goals of maximizing joint profits and minimizing consumption are generally not aligned also surprisingly a decrease in a cost parameter can lead to a decrease in profits it may be necessary but is always possible to renegotiate the shared savings contract to reap the benefits of a cost decrease

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

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

technological competition uncertainty and oligopoly abstract in an oligopoly context the present technological choice of a firm which expects to receive private revelant information just prior to the uncertain market stage has both a flexibility value and a strategic commitment value in contrast to some common wisdom ideas we provide a natural two stage competition framework in which an increase in uncertainty always raises the commitment value of the technological choice of the firm and may decrease its flexibility value when the increased uncertainty takes the form of more variable beliefs the first result tends to reinforce therefore the findings of the strategic commitment literature under certainty

the choice of energy saving modes for an energy intensive manufacturer considering non energy benefits in practice energy intensive manufacturers have two main options when improving their energy efficiency design and implement energy efficiency projects on their own we call this self saving or enter into an energy performance contracting epc which mainly includes shared savings and guaranteed savings in this paper we will discuss an energy intensive manufacturer facing self saving and shared savings options and how this manufacturer chooses the optimal energy saving mode when non energy benefits are considered we only consider costs and profit as non energy benefits and formulate an optimization model of self saving and a stackelberg game model of shared savings from our model analysis when considering only energy savings we find that the optimal unit savings has a monotonic impact on the optimal profit of the manufacturer our results indicate that the manufacturer will prefer the second option to the first when the investment cost factor ratio of the energy service company esco to the manufacturer is small otherwise the manufacturer will prefer the first to the second furthermore when considering non energy benefits we find that the results change in some cases

computational controversies in disequilibrium and shortage modelling of centrally planned economies abstract most disequilibrium and shortage models of centrally planned economies fall into three categories testable excess demand the portes school disequilibrium indicators and kornai s economics of shortage these models have generated numerous controversies and conflicting empirical results however this paper argues that some disputes are not caused by the theoretical features of the models but rather by the utilisation of different estimation methods that are not directly comparable this suggests that several controversies are more apparent than real and can be resolved through the improvement of computational techniques and statistical hypothesis testing theory

price versus production postponement capacity and competition this article presents a comparative analysis of possible postponement strategies in a two stage decision model where firms make three decisions capacity investment production inventory quantity and price typically investments are made while the demand curve is uncertain the strategies differ in the timing of the operational decisions relative to the realization of uncertainty we show how competition uncertainty and the timing of operational decisions influence the strategic investment decision of the firm and its value in contrast to production postponement price postponement makes the investment and production inventory decisions relatively insensitive to uncertainty this suggests that managers can make optimal capacity decisions by deterministic reasoning if they have some price flexibility under price postponement additional postponement of production has relatively small incremental value therefore it may be worthwhile to consider flexible ex post pricing before production postponement reengineering while more postponement increases firm value it is counterintuitive that this also makes the optimal capacity decision more sensitive to uncertainty we highlight the different impact of more timely information which leads to higher investment and inventories and of reduced demand uncertainty which decreases investment and inventories our analysis suggests appropriateness conditions for simple make to stock and make to order strategies we also present technical sufficiency and uniqueness conditions under price postponement these results extend to oligopolistic and perfect competition for which pure equilibria are derived interestingly the relative value of operational postponement techniques seems to increase as the industry becomes more competitive

the effect of incomplete information about future technological opportunities on pre emption abstract in this paper we model the strategic choice of investment by an incumbent firm facing competition from a potential entrant and the uncertain prospect of technological development the model presented extends the basic dixit model into two directions it allows for production over two periods and introduces uncertainty about the technology available in the second we show that the incumbent does not necessarily prefer to pre commit irreversibility of investment creates in fact an option value of retaining flexibility and the strategic gains from pre commitment must be compared with the option value for strategic investment to be chosen the strategic use of investment can also explain the observed inertia of incumbent firms in the adoption of new technologies compared to new entrant firms