The Profit‐Maximizing Case for Corporate Social Responsibility in a Bilateral Monopoly

We analyze a stylized distribution channel (bilateral monopoly) model where an upstream manufacturer sells output to a downstream retailer. In a two‐stage linear demand game setting, we show that a two‐part contract, consisting of a wholesale price and corporate social responsibility (CSR) component, can be utilized by the manufacturer to fully coordinate and control its retailer. Thus, a CSR contract can be used in place of the traditional two‐part tariff scheme (wholesale price and fixed franchise fee) to optimally coordinate the marketing channel. Our model provides a novel theoretical profit‐maximizing rationale for the strategic use of CSR. Copyright © 2013 John Wiley & Sons, Ltd.     

Bait and ditch: Consumer naïveté and salesforce incentives

We analyze a model of price competition between a transparent retailer and a deceptive one in a market where a fraction of consumers is naïve. The transparent retailer is an independent shop managed by its owner. The deceptive retailer belongs to a chain and is operated by a manager. The two retailers sell an identical base product, but the deceptive one also offers an add‐on. Rational consumers never consider buying the add‐on while naïve ones can be “talked” into buying it. By offering the manager a contract that pushes him to never sell the base good without the add‐on, the chain can induce an equilibrium in which both retailers obtain more‐than‐competitive profits. The equilibrium features price dispersion and market segmentation, with the deceptive retailer targeting only naïve consumers whereas the transparent retailer serves only rational ones.     

Information markets, product markets and vertical merger

In many markets, firms have the option of advertising at price comparison sites to broaden their market reach. Such sites are often controlled by profit-maximizing “information gatekeepers” charging advertising fees. This paper considers vertical merger between such a monopoly information gatekeeper and a firm in the product market. We find that: (i) If the integrated firm can act as a price leader before independent firms make advertising and pricing decisions, then the merger is profitable. (ii) If the integrated firm cannot move first, then the merger is unprofitable, or divestiture is optimal in the case where the firm has already created the gatekeeper. As a result, the merged entity has an incentive to invest in technologies to support a price leader.     

Market-Share Contracts with Asymmetric Information

In this paper, a dominant firm and competitive fringe supply substitute goods to a retailer who has private information about demand. We show that it is profitable for the dominant firm to condition payment on how much the retailer buys from the fringe (market-share contracts). The dominant firm thereby creates countervailing incentives for the retailer and, in some cases, is able to obtain the full-information outcome (unlike in standard screening models, where the agent earns an information rent in the high-demand state and output is distorted in the low-demand state). Our results have implications for fidelity rebates, all-units discounts, and competition policy. Although some crowding out of the fringe may occur when demand is low, we show that market-share contracts need not be harmful for welfare.     

An investigation of causality between insider transactions and stock returns

Prior research shows that corporate insiders engage in profitable transactions by trading securities of their own firms. The main purpose of this study is to examine whether insider transactions and stock returns have causality relationships at the firm level for a sample of 2,521 firms during the period 1988 to 1998. We find a large impact of stock returns on subsequent insider transactions at both the aggregate and firm levels. The impact appears to be negative which suggests that insiders buy after stock price decreases and sell after stock price increases. Our findings on the predictive content of insider transactions for subsequent stock returns are primarily consistent with prior literature. We observe a positive but weak relationship between insider transactions and future stock returns.     

Coupons and price discrimination in vertically‐correlated markets

This research analyzes the non‐cooperative and cooperative strategies with respect to manufacturer and retailer coupons. In a model with one manufacturer selling its product to one retailer, it is found that the retailer can achieve third‐degree price discrimination equilibrium in retail markets by issuing coupons to demanders with higher elasticity. Although facing only one retailer, the manufacturer can also achieve the same third‐degree price discrimination equilibrium by issuing coupons directly to demanders of higher elasticity. However, when only one firm issues the coupon, both manufacturer and retailer coupons can help alleviate the channel profit loss due to double marginalization. If the manufacturer and the retailer non‐cooperatively issue coupons, then the subgame‐perfect Nash equilibrium outcomes are equivalent to those under the successive third‐degree price discrimination. Moreover, cooperative strategies between the manufacturer and the retailer can eliminate double marginalization, achieve the vertical integration effect, and lead to higher profits, consumer surpluses, and social surpluses than non‐cooperative coupon strategies. Copyright © 2004 John Wiley & Sons, Ltd.     

Competition Between Online and Physical Stores: The Implications of Providing Product Information by Pure‐Play E‐tailer

This paper studies the competition between a single pure‐play e‐tailer and a bricks‐and‐mortar retailer, which are originally spatially differentiated. By utilizing information and communication technology, a pure‐play e‐tailer can strategically control consumers' disutility for online purchase. However, such an action may also raise consumers' motivation to visit the physical store, which causes free‐riding by the bricks‐and‐mortar retailer. We show that in the presence of a high free‐riding effect, the e‐tailer should be willing to provide information only about ‘niche’ products, which also results in improving the welfare of all members in the market. Copyright © 2011 John Wiley & Sons, Ltd.     

The impact of access to consumer data on the competitive effects of horizontal mergers and exclusive dealing

We examine the influence of firms’ ability to employ individualized pricing on the welfare consequences of horizontal mergers. In a two‐to‐one merger, the merger reduces consumer surplus more when firms can price discriminate based on individual preferences compared to when they cannot. However, the opposite holds true in a three‐to‐two merger, in which the reduction in consumer surplus is substantially lower with individualized pricing than with uniform pricing. Further, the merger requires an even smaller marginal cost reduction to justify when an upstream data provider can make exclusive offers for its data to downstream firms. We also show that exclusive contracts for consumer data pose significant antitrust concerns independent of merger considerations. Implications for vertical integration and data mergers are drawn.     

Price Discrimination under Customer Recognition and Mergers

This paper studies the interaction between horizontal mergers and price discrimination by endogenizing the merger formation process in the context of a repeated purchase model with two periods and three firms wherein firms may engage in behavior‐based price discrimination (BBPD). From a merger policy perspective, this paper's main contribution is twofold. First, it shows that when firms are allowed to price discriminate, the (unique) equilibrium merger gives rise to significant increases in profits for the merging firms (the ones with information to price discriminate), but has no ex‐post effect on the outsider firm's profitability, thereby eliminating the so‐called (static) “free‐riding problem.” Second, this equilibrium merger is shown to increase industry profits at the expense of consumers' surplus, leaving total welfare unaffected. This then suggests that competition authorities should scrutinize with greater zeal mergers in industries where firms are expected to engage in BBPD.     

The strategic effect of retailers' in‐store advertising services under product variety competition

We study a retailer service model of in‐store advertising, in which a neutral retailer provides product information to consumers for free but charges manufacturers. Our results show that the retailer's optimal pricing induces the manufacturers to decrease the number of items they offer. Nevertheless, this relaxes the competition between the manufacturers so that they benefit from using the in‐store service, unless the cost of communicating with consumers about the between‐firm products is lower. Furthermore, the service can be made socially beneficial by reducing the inefficiency resulting from an excessive number of items when manufacturers are not well differentiated.     

Upstream Mergers,Downstream Competition,and R&D Investments

In this paper, we provide an explanation for why upstream firms merge, highlighting the role of R&D investments and their nature, as well as the role of downstream competition. We show that an upstream merger generates two distinct efficiency gains when downstream competition is not too strong and R&D investments are sufficiently generic: The merger increases R&D investments and decreases wholesale prices. We also show that upstream firms merge unless R&D investments are too specific and downstream competition is neither too weak nor too strong. When the merger materializes, the merger‐generated efficiencies pass on to consumers, and thus, consumers can be better off.     

The Impact of Board Structure on Corporate Social Responsibility: A Temporal View

Time plays an important role in corporate social responsibility (CSR) decisions. In the context of time and the boardroom, the consideration of CSR can be affected by board structure. For example, because of considerable short‐term pressures, this study posits that insiders on the board are less likely to prioritize the longer‐term time horizons needed to affect CSR. Following this perspective, a hypothesis is put forth that insiders generally have temporal orientations that are more short term in nature and that they therefore have a negative effect on CSR. A study of 300 of Australia's largest firms confirmed this hypothesis. However, when inside director compensation linked to environmental and social metrics and inside director CSR training are introduced as moderating variables, their interactive effects lead to positive results: both positively moderate the negative insider–CSR relationship in environmental and social dimensions. The study contributes to a temporal view of boards of directors, as well as to corporate governance and CSR. Copyright © 2016 John Wiley & Sons, Ltd and ERP Environment     

Strategic inventory in capacitated supply chain procurement

We study the strategic role of inventory in a sequential two‐period procurement setting, where the supplier's capacity in the first period is limited and the retailer has the option to hold inventory. We compare the equilibrium under a dynamic contract, where the decisions are made at the beginning of each period, and a commitment contract, where the decisions for both periods are made at the beginning of the first period. We show that there is a critical capacity level below which the outcomes under both types of contracts are identical. When the first period capacity is above the critical level, the retailer holds inventory in equilibrium and the inventory is carried due to purely strategic reasons; as capacity increases, so does the strategic role of inventory. The supplier always prefers lower capacity than the retailer, and the difference between supplier‐optimal and supply‐chain optimal capacities, and the corresponding profits, can be significant. Finally, we find that the retailer's flexibility to hold inventory is not always good for the participants or for the channel. Copyright © 2008 John Wiley & Sons, Ltd.     

Nonprofit mergers: Assessing the motivations and means

As nonprofit organizations seek to remain viable in an increasingly competitive environment, merger is an attractive (albeit complicated) option. This case study of the largest nonprofit association merger in U.S. history, involving three bowling associations, demonstrates the critical role of leadership in consummating a merger. The case illustrates a number of factors necessary to merger success: existence of a catalyst leader and a nucleus of like‐minded individuals who can serve as the impetus for change, sufficient time to accommodate the psychological and practical aspects of merging, opportunities for building social capital among the people involved in the merger, and preservation of cultural remnants that are carried over from the predecessor organizations to the newly merged entity.     

Vertical merger: monopolization for downstream quasi‐rents

This paper provides a welfare analysis of vertical merger between an input monopolist and downstream firms that compete perfectly in a homogeneous product market. The distinguishing feature of the present model is that the downstream firms face capacity constraints. As a result of downstream quasi‐rents, vertical merger—the extent of merger is gauged by the capacity share of the acquired downstream firm—may either raise or lower final output. An analytical criterion for distinguishing pro‐ and anti‐competitive mergers is derived, which relies entirely on pre‐merger market quantities and the capacity share of the downstream target. A common result is that vertical merger is output‐increasing even when unaffiliated downstream rivals are completely foreclosed. Copyright © 2008 John Wiley & Sons, Ltd.     

Market Power,Efficiencies, and Entry Evidence from an Airline Merger

We investigate the competitive effects of the merger between Delta Air Lines and Northwest Airlines (2009) in the domestic US airline industry. Applying fixed‐effects regression models, we find that the transaction led to short‐term price increases of about 11% on overlapping routes and about 10% on routes that experienced a merger‐induced switch of the operating carrier. Over a longer period, however, our estimation results are consistent with the hypothesis that both merger efficiencies and postmerger entry by competitors initiated a downward trend in price, leaving consumers with a small net price increase of about 3% on the affected routes. Copyright © 2014 John Wiley & Sons, Ltd.     

One‐Stop Shopping as a Cause of Slotting Fees: A Rent‐Shifting Mechanism

Consumers increasingly prefer to bundle their purchases into a single shopping trip, inducing complementaries between initially independent or substitutable goods. Taking this one‐stop shopping behavior into account, we show that slotting fees may emerge as a result of a rent‐shifting mechanism in a three‐party negotiation framework, where a monopolistic retailer negotiates sequentially with two suppliers about two‐part tariff contracts. If the goods are initially independent or sufficiently differentiated, the wholesale price negotiated with the first supplier is upward distorted. This allows the retailer and the first supplier to extract rent from the second supplier. To compensate the retailer for the higher wholesale price, the first supplier pays a slotting fee as long as its bargaining power vis‐à‐vis the retailer is not too large.     

The surprising benefits of a parallel universe

Suppose that the successful completion of a project requires performing n tasks, each of which has a probability of success p. The paper establishes under what conditions it may be profitable to engage in parallel multi‐tasking, i.e. tackling each task by following two independent routes. It is found that for ?n>1 parallel multi‐tasking is profitable for a wide range of parameters when costs are linear and is always profitable for convex costs. Copyright © 2008 John Wiley & Sons, Ltd.     

Decentralized Supply Chain Decisions on Lead Time Quote and Pricing with a Risk‐averse Supplier

We consider a decentralized supply chain containing a risk‐averse supplier and a risk‐neutral retailer with lead time‐sensitive and price‐sensitive demands. A Stackelberg game is employed to model the lead time quote and pricing decision process between the two members under the conditional value‐at‐risk criterion. A unique equilibrium is obtained. Using the corresponding centralized mode as a benchmark, we find that a less risk‐averse supplier is better to cooperate and share risk with the retailer to improve the entire supply chain's efficiency. With a uniformly distributed realized lead time, the impact of the supplier's risk aversion on the decisions can be characterized by a few threshold values of the late delivery penalty cost. In particular, when the unit delay penalty cost exceeds a certain level, a more risk‐averse supplier will counter‐intuitively quote a shorter lead time by risking a higher delay penalty cost. Copyright © 2016 John Wiley & Sons, Ltd.