Issue 3

Volume 20 JOURNAL OF ECONOMICS & MANAGEMENT STRATEGY
Fall 2011

“When Should Manufacturers Want Fair Trade?”: New Insights from Asymmetric Information when Supply Chains Compete

Jakub Kastl, David Martimort and Salvatore Piccolo
We study a model of competing manufacturer/retailer pairs where adverse selection and moral hazard are coupled with promotional externalities at the downstream level. In contrast to earlier models mainly focusing on a bilateral monopoly setting, we show that with competing brands a ‘laissez-faire’ approach towards vertical price control might not always promote productive efficiency.

Exclusivity and Control

Andrei Hagiu and Robin S. Lee
We model competition between content distributors (platforms) for content providers, and show that whether or not content is exclusive or “multihomes” depends crucially on whether or not content providers maintain control over their own pricing to consumers: if content providers sell their content outright and relinquish control, they will tend to be exclusive; on the other hand, if content providers maintain control and only “affiliate” with platforms, then multihoming is sustainable in equilibrium.

Quality Diversity and Prices in Markets for Experience Goods

Gerhard O. Orosel and Klaus G. Zauner
We analyze vertical product differentiation in a model where a good’s quality is unobservable to customers before purchase, a continuum of quality levels is technologically feasible, and minimum quality is supplied by a competitive fringe of firms. After purchase the true quality of the good is revealed.

Loyalty Rewards Facilitate Tacit Collusion

Yuk-fai Fong and Qihong Liu
Using a dynamic overlapping-generations model, we show that loyalty rewards robustly facilitate tacit collusion. We compare the sustainability of tacit collusion when uniform prices are used, when loyal customers are rewarded without using commitment, and when loyalty rewards are implemented by committing to offering customers either lower fixed repeat-purchase prices or fixed repeat-purchase discounts.

Product Line Choice in Retail Duopoly

Rafael Moner-Colonques, José J. Sempere-Monerris and Amparo Urbano
This paper develops a successive duopoly model to identify conditions under which differentiated retailers that compete in quantities, when deciding on the range of brands to offer, will carry overlapping product lines.

Efficient Delegation by an Informed Principal

Eric W. Bond and Thomas A. Gresik
Motivated by examples from the automobile industry, insurance, retailing, and multinational strategy, we study an organizational structure we refer to as "partial delegation." In a bargaining problem between an informed party and an uninformed party, partial delegation involves the informed party delegating bargaining to an agent while retaining control of its private information. We show that partial delegation enables the informed party to earn information rents without creating quantity distortions.

Workplace Performance, Worker Commitment, and Loyalty

Sarah Brown, Jolian McHardy, Robert McNabb and Karl Taylor
Using matched employer–employee level data drawn from the 2004 UK Workplace and Employee Relations Survey, we explore the determinants of a measure of worker commitment and loyalty (CLI) and whether CLI influences workplace performance. Factors influencing employee commitment and loyalty include age and gender, whilst workplace level characteristics of importance include human resource (HR) practices.