Cross-reward effects in a coalition loyalty program: The impact of a point currency devaluation

While single-brand reward programs encourage customers to remain loyal to that one brand, coalition programs encourage customers to be “promiscuous” by offering points redeemable across partner stores. Despite the benefits of this “open relationship” with customers, store managers face uncertainty as to how rewards offered by partners influence transactions at their own stores. We use a model of multi-store purchase incidence and spend to show how the value of points shared among partner stores can explain patterns in customer-level purchases across them. We also allow reward spillovers to be moderated by three measures of store affinity that characterize a coalition’s portfolio: the relative popularity, geographic distance, and overlap in product categories between each pair of stores.For the coalition studied, popularity affinity was the main determinant of the valence of cross-reward effects, both before and after the devaluation. In contrast, category and geographic affinity had a smaller and more heterogenous impact. Through the use of an event where the loyalty program uniformly devalued the entire coalition’s value of reward points, we show that cross-reward effects changed (lessened), leading to larger financial losses for the most popular stores. While we do not observe changes to the composition of the coalition’s portfolio, our results also suggest that the value of a shared reward currency may be driven by the inclusion of smaller partners.     

Reducing the carbon footprint in a vehicle routing problem by pooling resources from different companies

In this study, we propose that pooling resources would reduce both the carbon footprint and economic costsin the vehicle routing problem with time windows. A mathematical formulation for the vehicle routing problem considering the carbon footprint as a constraint is proposed. The model is approached with the scatter search metaheuristic and analyzed from the perspective of game theory to evaluate the stability of the coalition after pooling. We define a theoretical case for four suppliers on an instance partition from Solomon’s library using several scenarios from individual participation to a full coalition. For each of these scenarios, we realize a sweep of the objective space. The results show that the more resources are shared, the greater the benefit. The best savings and contributions are achieved by operating in complete cooperation. These savings were distributed as fairly as possible to maintain a stable coalition using the Shapley value.     

Sharing the value‐at‐risk under distributional ambiguity

This paper considers the problem of risk sharing, where a coalition of homogeneous agents, each bearing a random cost, aggregates their costs, and shares the value‐at‐risk of such a risky position. Due to limited distributional information in practice, the joint distribution of agents' random costs is difficult to acquire. The coalition, being aware of the distributional ambiguity, thus evaluates the worst‐case value‐at‐risk within a commonly agreed ambiguity set of the possible joint distributions. Through the lens of cooperative game theory, we show that this coalitional worst‐case value‐at‐risk is subadditive for the popular ambiguity sets in the distributionally robust optimization literature that are based on (i) convex moments or (ii) Wasserstein distance to some reference distributions. In addition, we propose easy‐to‐compute core allocation schemes to share the worst‐case value‐at‐risk. Our results can be readily extended to sharing the worst‐case conditional value‐at‐risk under distributional ambiguity.     

The Equal Surplus Division Value for Cooperative Games with a Level Structure

Group Decision and Negotiation - In this paper, we investigate the equal surplus division value for cooperative games with a level structure, which is a sequence of coalition structures becoming...     

The Core of a Production Economy with Asymmetric Information

The paper analyses the core of a production economy with asymmetric information. Due to the incompleteness of information the transactions an agent can make are restricted. However, if the agent joins a coalition, his information changes according to an exogenously given information rule. The production possibilities of a coalition are described by a technology set and information that the coalition can employ in production. This information depends on the information of the coalition members and is also described by an information rule. Given that the technology sets satisfy some regularity conditions, a production economy with asymmetric information generates a well‐defined cooperative game. It is shown that the core of this game and thus the core of the underlying economy is non‐empty provided that the technology sets satisfy a balancedness condition. This result holds independently of the given information rules.     

Coalition Formation Procedures: The Impact of Issue Saliences and Consensus Estimation

Coalition formation procedures incorporate two properties that are not often found in other coalition formation models: the choice between different formation paths and constrained consensus positions. However, there are two aspects of coalition formation procedures that are often overlooked: issue saliences and consensus estimation. Issue saliences are a measure of the importance that parties can attribute to issue dimensions. Initially, we employ the classical application to implement issue saliences. The classical application combines the Euclidean distance with the center of gravity as a consensus estimate. Secondly, we introduce a consistent distance application where the coalition consensus position is determined by minimizing the sum of salience-weighted Euclidean distances. The impact of these aspects is examined with the help of both numerical and empirical applications. The results indicate that both the consensus estimation method and the inclusion of issue saliences do not only have an impact on the estimated consensus position. They also determine the individual parties’ preferences towards the potential coalition formation procedures.     

Negotiating a Stable Government: An Application of Bargaining Theory to a Coalition Formation Model

In this paper, we apply bargaining theory to a certain model of coalition formation. The notions of a feasible government and a stable government are central in the model considered. By a government, we mean a pair consisting of a majority coalition and a policy supported by this coalition. The aim of this paper is to establish which stable government should be created if more than one stable government exists or, in case there is no stable one, which feasible government should be formed if more than one feasible government exists. Several bargaining procedures leading to the choice of one stable (or feasible) government are proposed. We define bargaining games in which only parties belonging to at least one stable (or feasible) government bargain over the creation of a government. We consider different bargaining costs. We investigate subgame perfect equilibria of the bargaining games defined. It turns out that the prospects of a party depend on the procedure applied, and on the bargaining costs assumed. We also apply the coalition formation model to the Polish Parliament after the 2001 elections and apply the different bargaining games for the creation of a government to this example.     

Equilibrium coalition structures in the presence of foreign direct investment

This paper incorporates foreign direct investment (FDI) into the examination of trading bloc formation with endogenously determined coalition structures. In so doing, we build a three-country model, in which firms serve foreign markets either by exporting or undertaking FDI, and consider a coalition formation game with the Coalition Proof Nash Equilibrium as an equilibrium concept. We find that the equilibrium coalition structure varies upon firms characterization before and after the formation of a trading bloc. As in the literature, when all firms are exporters in the pre- and post-formation, bilateralism can be an equilibrium outcome. However, when trade barriers are not so high as to be trade-prohibitive and the environment is favorable to multinational activities in the pre- or post-formation, only global free trade will prevail as an equilibrium coalition structure.     

Negotiating free trade

We develop a dynamic bargaining model in which a leading country endogenously decides whether to sequentially negotiate free trade agreements with subsets of countries or engage in simultaneous multilateral bargaining with all countries at once. We show how the structure of coalition externalities shapes the choice between sequential and multilateral bargaining, and we identify circumstances in which the grand coalition is the equilibrium outcome, leading to worldwide free trade. A model of international trade is then used to illustrate equilibrium outcomes and how they depend on the structure of trade and protection. Global free trade is not achieved when the political-economy motive for protection is sufficiently large. Furthermore, the model generates both “building bloc” and “stumbling bloc” effects of preferential trade agreements. In particular, we describe an equilibrium in which global free trade is attained only when preferential trade agreements are permitted to form (a building bloc effect), and an equilibrium in which global free trade is attained only when preferential trade agreements are forbidden (a stumbling bloc effect). The analysis identifies conditions under which each of these outcomes emerges.     

Coalition formation in international monetary policy games

This paper analyses coalition formation in monetary policy coordination games between n countries. We show that some but not all countries may join if the decision to be a member of the coalition is incentive-compatible for the individual country. Positive spillovers of the coalition formation process and the resulting free-rider problem limit the stable coalition size: since the coalition members are bound by the union’s discipline, an outsider can successfully export inflation without fearing that the insiders will try to do the same. These ‘gains from staying out’ arise even in the case of symmetric shocks.     

Multi-Brand Loyalty Cards: A Good Idea

The UK's leading coalition loyalty card scheme was launched at a time when questions were raised regarding the viability of such schemes. Two years into the scheme, it is now appropriate to review the scheme's relationship with its' customers and judge its' success in terms of its ability to influence card holders' behaviour.

To meet the objectives a survey methodology was adopted, and a new questionnaire devised for administration to a sample of coalition loyalty card scheme cardholders. The survey achieved 153 responses from the scheme members.

Findings from the study revealed that coalition loyalty card scheme holders' exhibit weak bonds between the card provider and its customers and that customers display signs of low commitment, low trust and low perceived relational benefits. There is a decisive lack of awareness of many sponsors and this confusion seemed to be leading to the use of coalition loyalty card scheme as a single-brand card. Although usage rates are on a par with other loyalty schemes, a lack of involvement seems apparent; indicating that no considerable increase in share of customer had occurred. This is mainly down to poorly targeted communications and irrelevant reward offerings.

Finally, there was little to suggest that coalition loyalty card scheme are currently having much influence over consumer behaviour, as the bonds between the two parties were not strong enough to encourage this. However, this does not indicate that the current market leader is currently unsuccessful, there is evidence to suggest consumers perceive real benefits in coalition schemes and that there is a willingness to alter their behaviour if the motivation is sufficient. Implications for future research include more specific investigations into the dynamic of the relationship between loyalty schemes and consumers and further research on coalition schemes per se.     

The influence of political risk on the scope of internationalization of regulated companies: Insights from a Spanish sample

Political risk not only constitutes a threat for multinational enterprises but can also be a source of opportunities. Exposure to and accumulated experience dealing with political risk allows firms to better implement a wide set of political actions such as negotiation of entry conditions, lobbying, litigation, campaign contributions and coalition formation, leading to preferential conditions, reduced environmental uncertainty, reduced transaction costs and increased long-term sustainability to the firm. These advantages facilitate investments in countries with higher and more diverse levels of risk and make political risk to be positively associated with the firm's scope of internationalization. This effect is not homogeneous across firms. Drawing from a sample of 164 Spanish companies with investments in 119 countries, we find that the impact is greater for companies in industrial sectors that are the object of greater governmental regulation than it is for firms in non-regulated manufacturing or service sectors, with less frequent interactions with home and host-country institutions.     

Multinational enterprises’ risk mitigation strategies in emerging markets: A political coalition perspective

This paper contributes to the IB literature by investigating MNEs’ risk mitigation strategies in emerging markets. Drawing on institutional perspectives and March’s theoretical concept of forming a ‘political coalition’, we propose that risk mitigation cannot be limited to passive compliance and/or demonstrating good corporate behavior, but should extend to collective efforts by building a political coalition and working with key stakeholders to manage potential risk and obtain favorable outcomes in complex institutional environments. In considering MNEs in contemporary China and India, we offer different types of risk mitigation strategies under various institutional contexts and a framework for future research.     

Institutional investor heterogeneity and firm valuation: Evidence from Latin America

This article analyses how the corporate valuation of Latin American firms is affected by the presence of a blockholder institutional investor. The study uses a data set of 562 firms from six Latin American countries for the 1997–2011 period. We found that the presence of an institutional investor has a positive effect of 8% on firm value, which increases to 21% for the cases where there is blockholder coalition with an institutional investor. After dividing the sample by investor type, we found that independent institutional ownership implies a positive premium on firms' Tobin's Q, while the presence of a grey investor has a negative effect on firm valuation.     

Retailers’ coalition and quantity discounts under demand uncertainty

Coalition of retailers is a nowadays phenomenon in retailing channels (RCs) that makes it possible for the retailers to enhance their business performance and respond to the consumers' needs more effectively. This paper discusses the retailers' coalition advantages and challenges in a two-echelon retailing channel consist of one wholesaler and two non-competing retailers who serve the consumers. The model is developed under a classic newsvendor problem where an all-unit quantity discount is offered by the wholesaler. Our investigations are conducted for both homogeneous/heterogeneous retailers under three different scenarios. In the developed models, the retailers start to make a coalition and make a joint order in order to gain more from the offered discount by the wholesaler, and then using a heuristic procedure they allocate the received order to serve their individual markets. The main objective of this study is to analyze and resolve challenges of the retailers' coalition when a quantity discount is offered in order to make them capable to meet consumers' needs in the best possible manner. Three models are developed: (1) no-coalition decentralized scheme, (2) decentralized coalition where the retailers coalesce, and (3) centralized coalition where not only the retailers but the wholesaler participate in the coalition scheme. Our paper contributes to the RC management literature by analyzing the benefits of the retail coalition in taking most advantage from an offered quantity discount. Results demonstrate that the optimal configuration of the retailers' coalition increases profits of both the retailers and the RC in comparison with the no-coalition scenario. Our findings help procurement managers to rethink their ordering policy toward forming coalition to gain more profits and enhance their service level to meet consumers’ needs.     

Coalition Formation: The Role of Procedure and Policy Flexibility

A spatial model of coalition formation is used together with data from Dutch elections and theoretical instances to study different procedures of coalition formation. The model shows that procedure plays an important role in reaching a coalition agreement and that political parties do not necessarily benefit from being a first-mover. Moreover, it is shown that a decrease in a party’s flexibility can be (dis)advantageous in coalition negotiations. Furthermore, certain power sharing tactics appear not always to lead to an agreement that is in a party’s advantage. The main message put forward is that the procedure of forming a coalition plays a more important role than is usually acknowledged in literature and practice.     

Class alliances and conflict: An explanation of political transitions in 19th‐century Europe

I develop a model analyzing common interests and conflict among four classes—capitalists, workers, landlords, and peasants in 19th‐century Europe—and show that strong class position, based on a high degree of organization and solidarity, may actually be detrimental to the economic and political advantage of that class. This occurs when a strong class is excluded from a major class coalition via coalition formation processes. The reason is that the weak class, if they enjoy bargaining power over even weaker classes within a coalition, may not want to form a coalition with the strong class. I apply the main results to coalition formation and political transitions in 19th‐century European society.     

Regional Cooperation Toward Green Asia: Trade in Low Carbon Goods

Governments in the Asian region have been taking actions in the form of voluntary targets and policy commitments to improve the production and use of low carbon goods (LCG). However, these commitments are often challenged by many constraints, such as technological barriers and financial deficiencies. Within this context, the main objective of this study is to measure the potential of major emerging Asian economies for exports in LCG under the grand regional coalition, partial regional coalition, and standalone scenarios. The analysis indicates that emerging Asian economies will increase their export potential in LCG more under the grand coalition scenario.     

Corporate ownership and control contestability in emerging markets: The case of Colombia

This study examines the structure of voting control and blockholders’ contestability for a sample of 233 non-financial listed firms in Colombia during 1996–2004. Corporate control is characterized by high ownership concentration and blockholder power, which implies low separation ratios between cash flow rights and voting rights. On average the separation ratios for the largest voting block is 0.95, while that for the fourth largest shareholder is 0.75. Corporate control is privately biased when there is direct monitoring of firm management by controlling owners. Regression results show that a more equal distribution of equity among large blockholders has a positive effect on firm value. Contestability matters most when firm shares are liquid and actively traded on the stock market. This finding is reinforced when the probability that the largest block can form a winning coalition decreases and performance variables, such as market to sales ratio and return on equity, are included in the estimating equations as substitutes for firm value. In addition, our estimations provide evidence that diversion of rents (tunneling) is limited by blockholders’ contestability.     

Searching Pareto Optimal Solutions for the Problem of Forming and Restructuring Coalitions in Multi-Agent Systems

Coordination is one of the fundamental research issues in distributed artificial intelligence and multi-agent systems. Current multi-agent coalition formation methods present two limits: First, computation must be completely restarted when a change occurs. Second, utility functions of the agents are either global or aggregated. We present a new algorithm to cope with these limits. The first part of this paper presents a coalition formation method for multi-agent systems which finds a Pareto optimal solution without aggregating the preferences of the agents. This protocol is adapted to problems requiring coordination by coalition formation, where it is undesirable, or not possible, to aggregate the preferences of the agents. The second part of this paper proposes an extension of this method enabling dynamic restructuring of coalitions when changes occur in the system.