Exclusive Territories and Manufacturers’ Collusion

This paper highlights the rationale for exclusive territories in a model of repeated interaction between competing supply chains. We show that with observable contracts exclusive territories have two countervailing effects on manufacturers' incentives to sustain tacit collusion. First, granting local monopolies to retailers distributing a given brand softens inter- and intrabrand competition in a one-shot game. Hence, punishment profits are larger, thereby rendering deviation more profitable. Second, exclusive territories stifle deviation profits because retailers of competing brands can adjust their pricing decisions to the wholesale contract offered by a deviant manufacturer, whilst intrabrand competition prevents such `instantaneous reaction'. We show that the latter effect tends to dominate the former, whereby making exclusive territories a more suitable organizational mode to sustain upstream cooperation. These insights carry over when manufacturers voluntarily decide whether to disclose contracts and can change the distribution mode every period; moreover, they strengthen under imperfect intrabrand competition. Finally, we extend the model to allow for retailers' service investments. Here a novel effect emerges under exclusive territories: a retailer of the deviant manufacturer increases its service investment as a response to a lower wholesale price. This renders deviation more profitable, thereby softening the pro-collusive effect of exclusive territories.Exclusive territories, supply chains, tacit collusion, information sharing, vertical restraints.

Designing cooperation mechanisms for supply chains

The paper defines generic requirements towards cooperative planning in the nucleus of any supply network that is constituted by a pair of autonomous manufacturer and supplier who possess asymmetric information on demand forecast and costs, respectively. Then a novel way is suggested for investigating this problem by means of the apparatus of mechanism design. The analysis results in some provable generic properties as for efficiency and truthfulness, and shows the impossibility of fair cost and profit sharing. Further on, design principles towards a payment scheme are devised that provide incentive for the partners to cooperate in order to minimize costs. This payment can be considered the price for a flexible supply service. As examples, the generic framework is instantiated with two particular cooperative supply mechanisms

Price Discrimination in Input Markets: Quantity Discounts and Private Information

We consider a monopolistic supplier’s optimal choice of wholesale tariffs when downstream firms are privately informed about their retail costs. Under discriminatory pricing, downstream firms that differ in their ex ante distribution of retail costs are offered different tariffs. Under uniform pricing, the same wholesale tariff is offered to all downstream firms. In contrast to the extant literature on thirddegree price discrimination with nonlinear wholesale tariffs, we find that banning discriminatory wholesale contracts—the usual legal practice in the EU and US— often is beneficial for social welfare. This result is shown to be robust even when the upstream supplier faces competition in the form of fringe supply

Buyback and return policies for a book publishing firm = Egy könyvkiadó vállalat visszavásárlási stratégiája

A dolgozat célja egy vállalati gyakorlatból származó eset elemzése. Egy könyvkiadót tekintünk. A kiadó kapcsolatban van kis- és nagykereskedőkkel, valamint a fogyasztók egy csoportjával is vannak kapcsolatai. A könyvkiadók projekt rendszerben működnek. A kiadó azzal a problémával szembesül, hogy hogyan ossza el egy frissen kiadott és nyomtatott könyv példányszámait a kis- és nagykereskedők között, valamint mekkora példányszámot tároljon maga a fogyasztók közvetlen kielégítésére. A kiadóról feltételezzük, hogy visszavásárlási szerződése van a kereskedőkkel. A könyv iránti kereslet nem ismert, de becsülhető. A kis- és nagykereskedők maximalizálják a nyereségüket. = The aim of the paper is to analyze a practical real world problem. A publishing house is given. The publishing firm has contacts to a number of wholesaler / retailer enterprises and direct contact to customers to satisfy the market demand. The book publishers work in a project industry. The publisher faces with the problem how to allocate the stocks of a given, newly published book to the wholesaler and retailer, and to hold some copies to satisfy the customers direct from the publisher. The publisher has a buyback option. The distribution of the demand is unknown, but it can be estimated. The wholesaler / retailer maximize the profits. The problem can be modeled as a one-warehouse and N-retailer supply chain with not identical demand distribution. The model can be transformed in a game theory problem. It is assumed that the demand distribution follows a Poisson distribution

Evolution of Supply Chain Collaboration: Implications for the Role of Knowledge

Increasingly, research across many disciplines has recognized the shortcomings of the traditional “integration prescription” for inter-organizational knowledge management. This research conducts several simulation experiments to study the effects of different rates of product change, different demand environments, and different economies of scale on the level of integration between firms at different levels in the supply chain. The underlying paradigm shifts from a static, steady state view to a dynamic, complex adaptive systems and knowledge-based view of supply chain networks. Several research propositions are presented that use the role of knowledge in the supply chain to provide predictive power for how supply chain collaborations or integration should evolve. Suggestions and implications are suggested for managerial and research purposes

Value of supplier's capacity information in a two-echelon supply chain

Cataloged from PDF version of article.In traditional supply chain models it is generally assumed that full information is available to all parties involved. Although this seems reasonable, there are cases where chain members are independent agents and possess different levels of information. In this study, we analyze a two-echelon, single supplier-multiple retailers supply chain in a single-period setting where the capacity of the supplier is limited. Embedding the lack of information about the capacity of the supplier in the model, we aim to analyze the reaction of the retailers, compare it with the full-information case, and assess the value of information and the effects of information asymmetry using game theoretic analysis. In our numerical studies, we conclude that the value of information is highly dependent on the capacity conditions and estimates of the retailers, and having information is not necessarily beneficial to the retailers

Substitution Effects in Supply Chains with Asymmetric Information Distribution and Upstream Competition

Inventory management in markets with substituting customers is extremely challenging, not only for a downstream wholesaler, but also for upstream manufacturers. Motivated by the structures in the agrochemical market, we analyze the optimal production and stocking quantities of a manufacturer and a wholesaler, respectively, in a two-stage supply chain with upstream competition and vertical information asymmetries. We characterize a monopolistic wholesaler's optimal stocking quantities and show that these quantities are not necessarily monotonic, neither in the available production quantities nor in the customers' substitution rates. We further derive the optimal production quantities of a monopolistic and a competitive manufacturer when they are incompletely informed about the wholesaler's stocking quantities. We find that the introduction of competition may lead to decreasing production quantities for some products. Furthermore, a product's end-of-season inventories at the manufacturer which arise due to information asymmetries may decrease even when initial production levels increase. Key words: customer substitution; supply chain; asymmetric information; competition; inventory managemen

Value of supplier's capacity information in a two-echelon supply chain

In traditional supply chain models it is generally assumed that full information is available to all parties involved. Although this seems reasonable, there are cases where chain members are independent agents and possess different levels of information. In this study, we analyze a two-echelon, single supplier-multiple retailers supply chain in a single-period setting where the capacity of the supplier is limited. Embedding the lack of information about the capacity of the supplier in the model, we aim to analyze the reaction of the retailers, compare it with the full-information case, and assess the value of information and the effects of information asymmetry using game theoretic analysis. In our numerical studies, we conclude that the value of information is highly dependent on the capacity conditions and estimates of the retailers, and having information is not necessarily beneficial to the retailers

CHAIN QUALITY MANAGEMENT IN CO-OPERATIVES

This paper investigates the relationship between the chosen quality strategy and the vertical co-ordination mechanism of a focal company by using new institutional economics, as well as strategic management approaches. The theoretical findings are tested using evidence from 19 of the largest Polish dairy cooperatives, surveyed in spring 2006. The results show that all co-ops recognise the changing market requirements and are treating food quality as more than plain food safety and the ability to continuously reproduce an ex ante defined set of attributes. However, compared to investor-owned dairies, co-ops are disadvantaged in quality-based competition due to their lower flexibility and access to financial and qualified human resources. To overcome this intense competition, co-ops modify their production profile, which leads to market segmentation. Moreover, the choice of quality strategy is an economic activity, guided by the co-op's profit expectations within the selected market. The chosen quality strategy determines the design of the vertical co-ordination mechanism. Thus, the higher the requirements for the final product, the further quality management systems go beyond a firm's boundaries, and the higher is the intensity of the relationships between the intermediary stages in the dairy chain.Network theory, Relationship management, Quality management, Cooperatives, Poland, Institutional and Behavioral Economics,

Price Discrimination in Input Markets: Quantity Discounts and Private Information

We consider a monopolistic supplier’s optimal choice of wholesale tariffs when downstream firms are privately informed about their retail costs. Under discriminatory pricing, downstream firms that differ in their ex ante distribution of retail costs are offered different tariffs. Under uniform pricing, the same wholesale tariff is offered to all downstream firms. In contrast to the extant literature on thirddegree price discrimination with nonlinear wholesale tariffs, we find that banning discriminatory wholesale contracts—the usual legal practice in the EU and US— often is beneficial for social welfare. This result is shown to be robust even when the upstream supplier faces competition in the form of fringe supply.Asymmetric Information; InputMarkets; Quantity Discounts; Price Discrimination; Screening; Vertical Contracting