Exchange rate pass-through and the role of international distribution channels

Manufacturers selling in foreign markets often do not completely pass on the effects of fluctuations in exchange rates to the prices of their products. Our paper addresses this puzzle and studies the effects of the international distribution channel on exchange rate pass-through. We develop an exchange rate pass-through model that takes into account the role of an intermediary between a domestic manufacturer and its consumers in a foreign market. We find that the magnitude of the pass-through depends on the presence of an incentive problem in the distribution channel. When there is no incentive problem, pass-through is complete; however, when there is an incentive problem, pass-through depends on various characteristics of the intermediary and the market setting. Our analysis underscores the importance of considering the role of international distribution channels and suggests directions for further work on exchange rate pass-through.Foreign exchange rates ; International trade ; International business enterprises

Return on investment implications for pharmaceutical promotional expenditures: The role of marketing-mix interactions

The authors empirically explore the revenue impact of marketing-mix variables and their interactions. The findings include the following: pharmaceutical direct-to-consumer advertising and detailing (sales force) affect demand synergistically, detailing raises price elasticity, and detailing has a higher return on investment than does direct-to-consumer advertising. The authors also discuss other implications and provide future research directions

Price Versus Quantity Monitoring

In an adverse selection context, this article explores the relative usefulness of price information over quantity information. The main finding is that price monitoring can induce a sales level that is greater than the full-information sales level. This imposes additional selling costs on the agent and reduces that agent\u27s rents. The analysis identifies sufficient conditions for the principal to prefer price monitoring over quantity monitoring. Business-format franchises exhibit many of the features of the setting analyzed here, and the article\u27s findings have implications for designing information systems in that sector of the economy. © 2006 by The University of Chicago. All rights reserved

Costs And Benefits Of Inducing Intrabrand Competition: The Role Of Limited Liability

When is inducing intrabrand competition (via nonexclusive distribution) an optimal strategy? To address this issue, a static model is developed to examine two settings. The manufacturer uses exclusive distributors in the first setting and nonexclusive distributors in the second. The analysis indicates that the choice of distribution rests critically on whether the manufacturer can effectively extract surplus from the distributors. Due to a variety of institutional reasons, the distributors\u27 liability is often limited in performing on behalf of the manufacturer; such limited liability restricts how much of the distributors\u27 surplus can be extracted. When the distributors\u27 surplus cannot be fully extracted, the manufacturer may prefer nonexclusive distribution even when distributors can free-ride on each other\u27s efforts

Price versus Quantity Monitoring

In an adverse selection context, this article explores the relative usefulness of price information over quantity information. The main finding is that price monitoring can induce a sales level that is greater than the full-information sales level. This imposes additional selling costs on the agent and reduces that agent's rents. The analysis identifies sufficient conditions for the principal to prefer price monitoring over quantity monitoring. Business-format franchises exhibit many of the features of the setting analyzed here, and the article's findings have implications for designing information systems in that sector of the economy.

Group-Buying And Channel Coordination Under Asymmetric Information

Social media and improvements in technology allow retailers to offer a group-buying option to consumers in a variety of markets. Extant research shows that when consumers are sufficiently heterogeneous, group-buying helps a retailer practice price discrimination. Our paper examines when a manufacturer may prefer its reseller to employ the group-buying mechanism in conjunction with a traditional posted price. In our model, the retailer is privately informed about market heterogeneity, which is summarized via the relative size and the level of price sensitivity of two consumer segments. We show that any value to the manufacturer, of requiring the retailer to offer group-buying, revolves around how profitability varies with market heterogeneity. Our principal finding is that group-buying benefits the manufacturer more when the retailer is privately informed about market size than about the level of consumer price sensitivity

Equity And Adverse Selection With Correlated Costs

We show that agent concern with inequity is not constraining for a principal when the binary costs of two risk neutral agents are correlated. © 2006 Elsevier B.V. All rights reserved

Comarketing Alliances: Should You Contract On Actions Or Outcomes?

Comarketing alliances often involve multiple partners, and a given partner\u27s marketing efforts on behalf of the alliance can indirectly affect the demand of the other partners. Individual partners, however, can ignore the effects of such an externality and invest suboptimally to the detriment of the alliance. This paper examines the relative effectiveness of outcome- and action-based contracts in providing the alliance partners with the incentives to invest appropriately. We develop a mathematical model in which a focal firm (e.g., Sony) contracts with two partners (e.g., McDonald\u27s and Old Navy) when each of these partners is privately informed about the impact of the alliance on its demand. Our analysis evaluates the strengths and weaknesses of outcome- (or output-) and action-based (or input-based) contracts in settings with varying levels of the demand externality. We find that when there is either no externality or a relatively weak positive externality, there is a strict preference for output-based contracts; that preference, however, is reversed with a sufficiently strong positive externality. This paper explains the underlying rationale for these findings. © 2011 INFORMS

Managing a Distribution Channel Under Asymmetric Information with Performance Requirements

In this paper we study how performance requirements may improve the working of a distribution channel when the retailer is better informed about demand conditions than the manufacturer. Performance requirements means that the manufacturer and retailer agree to (1) have the manufacturer set requirements on retail price or service or both, and (2) jointly invest in the information systems required to monitor the retailer's compliance with the requirements. We show that performance requirements on price and service will improve channel performance. But if requirements cannot be set on both performance dimensions, the choice among the remaining options is not straightforward. Price requirements may be worse than no requirements, and service requirements no better. The central problem with setting requirements on only one dimension is that the retailer then behaves suboptimally on the other. Between the two partial options, service requirements are better than price requirements in aligning the interests of the manufacturer and the retailer, whereas price requirements are better at inducing the retailer to reveal his demand.pay-for-performance, distribution channels