Joint Profit Research Articles

A game theoretic approach to coordinate pricing and vertical co-op advertising in manufacturer–retailer supply chains

Vertical cooperative (co-op) advertising is a marketing strategy in which the retailer runs local advertising and the manufacturer pays for a portion of its entire costs. This paper considers vertical co-op advertising along with pricing decisions in a supply chain; this consists of one manufacturer and one retailer where demand is influenced by both price and advertisement. Four game-theoretic models are established in order to study the effect of supply chain power balance on the optimal decisions of supply chain members. Comparisons and insights are developed. These embrace three non-cooperative games including Nash, Stackelberg-manufacturer and Stackelberg-retailer, and one cooperative game. In the latter case, both the manufacturer and the retailer reach the highest profit level; subsequently, the feasibility of bargaining game is discussed in a bid to determine a scheme to share the extra joint profit.

Coordinate inventory models with two-level credit policy and a price negotiation scheme in declining market

In this study, the coordinated inventory models with allowable trade credit are developed. The demand is considered to be price-sensitive and decreasing function of time. The models consider the two-level trade credit policy, i.e., vendor offers some credit period to buyer and buyer in turn offers partial credit period to the customer. An iterative procedure is developed for the integrated models to determine the buyer's optimal price and production/order strategy. It is observed that even if buyer's share is less, the total joint profit of the supply chain increases. To counter balance, the buyer's loss due to the joint decision, a negotiation scheme is introduced to distribute the extra profit between the vendor and the buyer. A numerical example and sensitivity analysis are given to validate the proposed problem. It is observed that price discount policy is beneficial and increases the total joint profit.

Determination of optimal pricing, shipment and payment policies for an integrated supplier buyer deteriorating inventory model in buoyant market with two-level trade credit

In this paper, an integrated supplier?buyer inventory model is studied when the units in inventory are subject to deterioration at a constant rate, the market demand is quadratic and sensitive to retailer price and the supplier offers a trade credit. The trade credit policy under assumption is 'two-part' strategy viz. 'net credit', that is, retailer has a choice between cash discount and trade credit. 'Net credit' means if the buyer pays within time period M1 then the buyer receives a cash discount; otherwise, the full account must be settled before time period M2 where M2 > M1 ≫ 0. The goal is to determine the optimal pricing, ordering, shipping and payment policy to maximise the joint profit per unit time. An algorithm is given to obtain optimal solution. The numerical example is given to validate the proposed model and to arrive at managerial insights.

Pricing for freight carriers in a competitive environment: A game theory approach

Article history: Received 2 January 2011 Received in revised form April, 18, 2011 Accepted 20 April 2011 Available online 22 April 2011 In recent years, development of freight transport industry has led to fierce competition among transportation companies and therefore carrier-pricing issue has received more attention by researchers. This paper studies pricing and fleet management decisions for full-truckload freight carriers, which compete on a road network. We propose a game theory approach under two scenarios. In the first, we model the non-cooperative game wherein the carriers announce their prices simultaneously in competition; in the second, we allow the carriers to share their information and announce their prices while participating in cooperation. We show that carriers can reach the highest profit level in the latter scenario; subsequently, a bargaining game is discussed as a scheme to share the extra joint profit. © 2011 Growing Science Ltd. All rights reserved

Improving Understanding of Collusion in Intermediate Microeconomics

Standard treatments of collusion in intermediate microeconomics textbooks frequently involve a Cournot duopoly facing linear demand with constant marginal costs of production. These presentations leave students with the misunderstanding that firms jointly behaving like a single-firm monopolist and profit maximising collusion are one and the same. We present a simple and effective way for improving student comprehension of collusion; this exercise results in collusion where the duopolists produce more total output than that of a monopolist while enjoying greater joint profits. The exercise can be used to clarify and lead to a better understanding of collusion and profit maximisation.

Cartel Ringleaders and the Corporate Leniency Program

Cartel ringleaders can apply for amnesty in some jurisdictions (e.g., the E.U.), whereas in othersthey are excluded (e.g., the U.S.). This paper provides a survey of identified ringleaders inrecent European cartel cases and explores theoretically the effect of ringleader exclusion oncollusive prices. Our survey shows that (i) cartels often had more than one ringleader, (ii) therole of ringleaders was very diverse and (iii) ringleaders were typically the largest cartelmembers. Our theoretical analysis reveals that ringleader exclusion leads to higher prices when(iv) the joint profit maximum cannot be sustained under a nondiscriminatory leniency policy, (v)antitrust fines depend on individual cartel gains in a nonlinear fashion and (vi) the sizedistribution of members is sufficiently heterogeneous. These findings support the imposition ofantitrust penalties proportional to firm size when ringleaders are excluded from the corporateleniency program.

Integrated inventory models with two–level credit policy and a price negotiation scenario for price–sensitive Stock–dependent demand

Article history: Received 6 September 2010 Received in revised form 18 January 2011 Accepted 20 January 2011 Available online 24 January 2011 In this research, the integrated inventory models are developed for price–sensitive stock– dependent demand and delay in payments are permissible. Two level trade credit police in the vendor–buyer and buyer–customer is considered. An easy–to–use solution algorithm is derived for the integrated models to determine the buyer’s optimal pricing and ordering strategy. A negotiation scenario is incorporated to distribute the extra profit between the vendor and buyer. A numerical example and sensitivity analysis are given to validate the proposed models. It is observed that the total joint profit of the integrated system can increase even if the price discount is offered to the buyer in proposed models. © 2011 Growing Science Ltd. All rights reserved

R&D WITH SPILLOVERS: MONOPOLY VERSUS NONCOOPERATIVE AND COOPERATIVE DUOPOLY

This paper compares industry profit and R&D propensity for a duopoly conducting either noncooperative or cooperative R&D and a monopoly, using two different basic models of strategic R&D. One postulates spillovers in R&D inputs and predicts that equilibrium joint profit and R&D levels are always larger under monopoly. The other postulates spillovers in R&D outputs and sometimes predicts that joint profit and R&D levels are larger under either of the alternative scenarios. In addition, unlike input spillovers, spillovers in R&D outputs sometimes exert a positive effect on both effective and private noncooperative R&D levels.

PEER EVALUATIONS AND TEAM PERFORMANCE: WHEN FRIENDS DO WORSE THAN STRANGERS

We use peer assessments as a tool to allocate joint profits in a real-effort team experiment. We find that using this incentive mechanism reduces team performance. More specifically, we show that teams composed of acquaintances rather than strangers actually underperform in a context of peer evaluations. We conjecture that peer evaluations undermine the inherently high level of intrinsic motivation that characterizes teams composed of friends and possibly exacerbate negative reciprocity among partners. Finally, we analyze the determinants of peer assessments and stress the crucial importance of equality concerns.

COLLUSIVE EQUILIBRIUM IN COURNOT OLIGOPOLIES WITH UNKNOWN COSTS*

The article studies collusive equilibria in an infinitely repeated Cournot oligopoly with unknown costs. I look at collusive pooled Perfect Bayesian equilibria and separating equilibria either with signaling or with communication. In the separating equilibria with signaling the firms play the strictly separating Bayesian Nash equilibrium in period 1 and produce the optimal incentive compatible collusive quantity vector from period 2 onwards. In the separating equilibrium with communication the optimal incentive compatible quantity vector is produced from period 1 onwards. Among these, the optimal separating equilibrium with communication gives the highest expected discounted joint profits.

Portuguese public debt and financial business before WWI

Government, public finance, and public debt framed the historical background for exceptional financial business opportunities for Henry Burnay as a private banker and a network with Baring Brothers, Comptoir National d’Escompte, Banque de Paris et des Pays Bas, Neuflize et Cie., Credit Lyonnais, Societe Generale, Deutsche Bank, Bank fur Handel & Industrie, Dresdner Bank, M. Jacob H. S. Stern and the Deutsche Effecten & Wechsel Bank from Frankfurt. Nineteenth-century financial markets and public debt emerge as the main players in the game. Credibility and honesty were important values for earning confidence and trust in international financial business, while bilateral-monopoly market situations required a lot of bargaining for joint profit maximization.

My teammate, myself and I: Experimental evidence on equity and equality norms

Abstract We study team formation in real-effort experiments in which participants bargain over a jointly produced outcome. Participants decide between undertaking a task alone or with another participant by releasing the minimum share of the future team outcome that they are willing to accept. We find that the equality norm prevails in a context in which merit could play an important role. The inability of high-ability individuals to claim a large share of the joint profits makes the dissolution of inefficient teams difficult, and results in unprofitable cooperation.

Mon équipe et moi

Résumé Nous étudions la formation des équipes dans des expériences à effort réel dans lesquelles est négocié un profit commun qui dépend de l’effort et des aptitudes de chacun. Les participants décident d’effectuer une tâche seuls ou en équipe. Les équipes sont maintenues quand les différents individus parviennent à s’accorder sur la répartition des gains futurs de l’équipe. Nos résultats montrent que la norme d’égalité prévaut dans un contexte où le mérite devrait jouer un rôle important, même dans le cas d’individus performants qui ne demandent pas une part importante des gains. Nous analysons des données françaises, japonaises et espagnoles et identifions des différences dans la formation des équipes. La norme d’égalité est particulièrement forte dans le cas des sujets japonais.

The Effects of Interaction Goals on Negotiation Tactics and Outcomes: A Dyad-Level Analysis Across Two Cultures

This study investigates how negotiators’ interaction goals influence their own and their counterparts’ negotiation tactics and outcomes across two cultures using a simulated employment contract negotiation. Results show that when negotiators placed greater importance on competitive goals, they used more distributive persuasion and fewer priority information exchange tactics, which reduced their counterparts’ profit; negotiators’ competitive goals also caused their counterparts to use fewer priority information exchange tactics, which in turn hurt their own profit. Dyad members’ competitive goals have an indirect, negative impact on joint profit. In addition, Chinese negotiators placed greater importance on competitive goals and used more distributive and fewer integrative tactics than Americans, but the associations between goals and tactics did not differ across cultures. Nevertheless, members of the two cultures took different paths to improve joint profit; as a result, Chinese dyads achieved no less joint profit than American dyads. The study sheds light on culture’s effect on the interactive processes by which goals impact negotiation performance.

How Do Interaction Goals Drive the Negotiation Dance: A Cross-Cultural Analysis of Social Motives, Strategy Sequences, Joint Gains, and Negotiator Satisfaction

This study provides a sequential analysis of the bargaining interaction within and across two phases and examines how negotiators’ interaction goals influence both parties’ behavioral sequences over time, and their negotiation outcomes. Sixty-seven negotiation dyads (35 Chinese, 32 Americans) simulated an employment negotiation. Results showed that (a) distributive and integrative reciprocity mediated the influence of competitive goals on joint profit, with goals having a stronger influence on reciprocity in the first half of the negotiation, yet reciprocity in the second half having a stronger influence on joint profit, (b) distributive and integrative transformational sequences mediated the influence of employers’ goals on employees’ individual gains, but not vice versa, and (c) culture had both main (e.g., Americans demonstrated a greater tendency to break distributive reciprocity than Chinese) and moderating effects (e.g., Chinese responded to counterparts’ competitive goals with more distributive complementary sequences, whereas Americans less distributive transformational sequences) in this process.

Free Collusion versus Centralized Collusion

This paper generalizes the classical duopoly collusion model by first deriving a new marginal cost curve. It then proves that freely colluded duopolists produce more joint output and enjoy larger joint profit than a monopolist, so they have higher incentive to collude. It also distinguishes free collusion from centralized collusion, competition from cooperation.

Sequential and global optimization for a closed-loop deteriorating inventory supply chain

Products such as IC chips, computers and mobile phones can become out of date due to technological innovation. However, these outdated products can be remanufactured and resold to market. In this paper, a closed-loop supply chain inventory system with multi-manufacturing cycles and multi-remanufacturing cycles is analyzed using sequential and global optimization. In the case of sequential optimization, the decision is made initially by the down-stream player, then by the up-stream player. In the case of global optimization, the decision is made jointly by all the players. The supply chain includes a manufacturer, a retailer, a collector and a material supplier. This paper considers out of date as a type of deterioration and generalizes the following three cases: (i) single manufacturing cycle and single remanufacturing cycle, (ii) single manufacturing cycle and multi-remanufacturing cycles, and (iii) multi-manufacturing cycles and single remanufacturing cycle. The analytical results of this study show that a significant increase in the joint profit will result when the integrated policy is adopted.

The culturally intelligent negotiator: The impact of cultural intelligence (CQ) on negotiation sequences and outcomes

Although scholars and practitioners have repeatedly touted the importance of negotiating effectively across cultures, paradoxically, little research has addressed what predicts intercultural negotiation effectiveness. In this research, we examined the impact of cultural intelligence (CQ) on intercultural negotiation processes and outcomes, controlling for other types of intelligence (cognitive ability and emotional intelligence), personality (openness and extraversion), and international experience. Transcripts of 124 American and East Asian negotiators were coded for sequences of integrative information behaviors and cooperative relationship management behaviors. CQ measured a week prior to negotiations predicted the extent to which negotiators sequenced integrative information behaviors, which in turn predicted joint profit, over and beyond other individual differences. Additional analyses revealed that the level of integrative sequencing was more a function of the lower-scoring than the higher-scoring negotiator within the dyad. Other individual difference characteristics were not related to effective intercultural negotiation processes. Theoretical and practical implications are discussed.

Revenue sharing with multiple airlines and airports

This paper investigates the effects of concession revenue sharing between an airport and its airlines. It is found that the degree of revenue sharing will be affected by how airlines’ services are related to each other (complements, independent, or substitutes). In particular, when carriers provide strongly substitutable services to each other, the airport has incentive to charge airlines, rather than to pay airlines, a share of concession revenue. In these situations, while revenue sharing improves profit, it reduces social welfare. It is further found that airport competition results in a higher degree of revenue sharing than would be had in the case of single airports. The airport–airline chains may nevertheless derive lower profits through the revenue-sharing rivalry, and the situation is similar to a Prisoners’ Dilemma. As the chains move further away from their joint profit maximum, welfare rises beyond the level achievable by single airports. The (equilibrium) revenue-sharing proportion at an airport is also shown to decrease in the number of its carriers, and to increase in the number of carriers at competing airports. Finally, the effects of a ‘pure’ sharing contract are compared to those of the two-part sharing contract. It is found that whether an airport is subject to competition is critical to the welfare consequences of alternative revenue sharing arrangements.

On the convexity of newsvendor games

This study considers a simple newsvendor situation that consists of n retailers, all selling the same item with common purchasing costs and common selling prices. Groups of retailers might increase their expected joint profit by inventory centralization, which means that they make a joint order to satisfy total future demand. The resulting newsvendor games are shown to have non-empty cores in the literature. This study investigates convexity of newsvendor games. We focus our analysis on the class of newsvendor games with independent symmetric unimodal demand distributions after providing several examples outside this class that are not convex. Several interesting subclasses, containing convex games only, are identified. Additionally, we illustrate that these results cannot be extended to all games in this class.