A Theory of Common Dealing with the Internet as an Innovative Distribution Channel

After the emergence of the Internet, an interesting question arises that what is its impact on the firms’ channel and pricing strategies. This paper applies game theory to study the strategic interactions between rational manufacturers, retailers, and consumers, and it generates the following results: 1. The presence of the Internet allows imperfectly competitive manufacturers to better coordinate their pricing, targeting, and channel strategies, thereby minimizing the agency costs involved in common dealing at the traditional outlets, which in turn enhances the manufacturers’ profits. 2. Exclusive dealing may and may not become more prevalent in the presence of the Internet. It all depends on the ratio of the population of switchers to the entire population of consumers. 3. The presence of the Internet allows a monopolistic manufacturer to screen consumers by serving different people at different outlets. Screening is less effective, however, in the case of imperfect competition. 4. A dynamic adjustment process is obtained which describes how a manufacturer should optimally change his channel and pricing strategies when the population of the Internet purchasers grows over time

The Optimal Coupon Strategy in the Presence of Internet

This paper characterizes the optimal coupon strategy for a monopolistic manufacturer in the presence of Internet. The literature on coupon strategies has examined the price discrimination function of regular coupons (those issued off the Internet) under the assumption of fu ll consumer awareness for the product; see Gerstner and Hess (1991, 1995). This paper allows the manufacturer to issue both regular and e-coupons in a marketing environment where some potential buyers are unaware of the product. We show that e-coupons perform a fundamentally different function than regular coupons: By issuing some properly designed e-coupons to a small number of consumers on the net, the manufacturer may benefit greatly from free advertising which raises the consumer awareness for the product. This happens because the e-coupons may be forwarded to the associates of the early receivers under the latter’s discretion. We distinguish two levels of redemption costs, the costs of acquiring a coupon, and the costs of carrying the coupon till redemp tion. We show that (1) if consumers have similar carrying costs, then an e-coupon and a regular coupon should be issued, which perform respectively the advertising and promotion functions; (2) If consumers have similar acquisition costs but very different carrying costs, and if there are many low-valuation consumers, then the manufacturer should issue just one e-coupon which performs the dual functions of advertising and promotion; (3) If consumers’ acquisition and carrying costs are both similar, and if there are few low-valuation consumers, then again an e-coupon and a regular coupon should be issued, which perform respectively the advertising and promotion functions, but in this case the face value of the e-coupon must be much higher than that in case (1). Despite the merits of e-coupons, we find that the issuance of e-coupons may reduce the benefits of regular coupons and/or aggravate the downstream channel members’ incentive problems. Our results are consistent with recent empirical facts

Dynamics of Trading Volume, Price, and Duration of Contractual Relationship

Abstract Agency theorists consider a firm as a nexus of contractual relationships. Contracting parties such as shareholders, debt holders, managers, input suppliers, advertising agencies and retailers may have information superior to outsiders concerning the firm's quality. In this paper, we show that the duration of contractual relationship within a firm has important implications on the dynamics of the price and trading volume of the firm's stock. If the duration of information asymmetry corresponds to that of contractual relationship, insiders with long-term relationship is shown to marginally prefer less aggressive trading strategies than those who can only access superior information temporarily. Such behavior makes it more difficult for the market maker * Address for correspondence: Ying-Ju Chen, phone: 212-998-0489, e-mail: [email protected], address: 44 W 4th Street, KMC 8-151, New York, NY 10012 1 to infer the existence of informed traders. The market maker will henceforth provide narrower bid-ask spreads, which attract discretionary liquidity traders to gather their trades in that period. With the long-term contractual relationship, uncertainty is resolved more slowly because the insider trades on her information advantage gradually. The long-term relationship also enlarges the liquidity traders' loss and discourages them from holding the firm's stock, and therefore reduces the amount of proceeds that the entrepreneur gathers when she makes financing. On the other hand, with the long-term relationship, a more efficient effort level can be expected, and thus the outcome of the investment plan will be higher. We conclude that the entrepreneur's profit as well as a firm's fundamental value will be influenced by the duration of the firm's internal contract. The optimal contractual duration depends on the adverse selection cost and the investment efficiency

Pilot Scale Production of Highly Efficacious and Stable Enterovirus 71 Vaccine Candidates

BACKGROUND: Enterovirus 71 (EV71) has caused several epidemics of hand, foot and mouth diseases (HFMD) in Asia and now is being recognized as an important neurotropic virus. Effective medications and prophylactic vaccine against EV71 infection are urgently needed. Based on the success of inactivated poliovirus vaccine, a prototype chemically inactivated EV71 vaccine candidate has been developed and currently in human phase 1 clinical trial. PRINCIPAL FINDING: In this report, we present the development of a serum-free cell-based EV71 vaccine. The optimization at each step of the manufacturing process was investigated, characterized and quantified. In the up-stream process development, different commercially available cell culture media either containing serum or serum-free was screened for cell growth and virus yield using the roller-bottle technology. VP-SFM serum-free medium was selected based on the Vero cell growth profile and EV71 virus production. After the up-stream processes (virus harvest, diafiltration and concentration), a combination of gel-filtration liquid chromatography and/or sucrose-gradient ultracentrifugation down-stream purification processes were investigated at a pilot scale of 40 liters each. Although the combination of chromatography and sucrose-gradient ultracentrifugation produced extremely pure EV71 infectious virus particles, the overall yield of vaccine was 7-10% as determined by a VP2-based quantitative ELISA. Using chromatography as the downstream purification, the virus yield was 30-43%. To retain the integrity of virus neutralization epitopes and the stability of the vaccine product, the best virus inactivation was found to be 0.025% formalin-treatment at 37 °C for 3 to 6 days. Furthermore, the formalin-inactivated virion vaccine candidate was found to be stable for >18 months at 4 °C and a microgram of viral proteins formulated with alum adjuvant could induce strong virus-neutralizing antibody responses in mice, rats, rabbits, and non-human primates. CONCLUSION: These results provide valuable information supporting the current cell-based serum-free EV71 vaccine candidate going into human Phase I clinical trials

Essays on financial economics

Thesis (Ph. D.)--Massachusetts Institute of Technology, Sloan School of Management, 1992.Includes bibliographical references.by Chyi-Mei Chen.Ph.D

Dynamics of Trading Volume, Price, & Duration of Contractual Relationship

Agency theorists consider a firm as a nexus of contractual relationships. Contract- ing parties such as shareholders, debt holders, managers, input suppliers, advertising agencies & retailers may have information superior to outsiders concerning the firm's quality. In this paper, we show that the duration of contractual relationship within a firm has important implications on the dynamics of the price & trading volume of the firm's stock. If the duration of information asymmetry corresponds to that of contractual relationship, insiders with long-term relationship is shown to marginally prefer less aggressive strategies of trading than those who can only access superior information temporarily. Such behavior makes it more diÆcult for the market maker to infer the existence of informed traders. The market maker will henceforth provide smaller bid-ask spreads, which attract discretionary liquidity traders to gather their trades in that period. With the long-term contractual relationship, uncertainty is resolved more slowly be- cause the informed trader trades on his information advantage gradually. This strategy enlarges the liquidity traders' loss & discourages them from holding the firm's stock. We conclude that a firm's fundamental value will be influenced by its choice between changing partners regularly & committing to a partner. From the viewpoints of the firm & uninformed traders, changing partners regularly is always an optimal policy under the topics of market eÆciency & information asymmetry