Consumer goods manufacturers usually sell their brands to consumers through common independent retailers. Theoretical research on such channel structures has analyzed the optimal behavior of channel members under alternative assumptions of manufacturer-retailer interaction (Vertical Strategic Interaction). Research in Empirical Industrial Organization has focused on analyzing the competitive interactions between manufacturers

Many researchers are concerned about the appropriateness of traditional research approaches and methodologies in the analysis of a digital economy. Using the Experimental Digital Economy (EDE), a new technology infrastructure that we have developed for a digital economy, we propose a new research methodology, a virtual field experiment, which makes it feasible and effective to test research hypotheses with the desired level of experimental controls and to probe successful business strategies in a real business world. Three summaries of research on a digital economy, like the efficiency of a digital market, the effectiveness of digital markets (posted-price markets and auctions), and the impact of quality certifications, address the implications of virtual field experiments. D 2002 Elsevier Science B.V. All rights reserved.

This paper explores production and outsourcing decisions for two original equipment manufacturers (OEM)who produce partially substitutable products and have opportunities to invest in reducing the manufacturing cost. In such an environment, competition drives both OEMs to set lower prices and invest more than would occur in the first-best solution, particularly when product substitutability is high. However, outsourcing provides a mechanism by which the two OEMs can credibly signal that they will not over-invest in cost reduction, mitigating mutually destructive cost competition. Our paper explores the role that an external supplier(s) can play in dampening competition between the OEMs when there are opportunities to invest in cost reduction. In particular, we characterize the conditions under which a supplier can profitably enter the market by inducing the OEMs to outsource production. We first examine a basic model of two identical OEMs in which there is a single common supplier and a single component that is a candidate for outsourcing. Later, we extend the basic model to allow for market asymmetry, more than one supplier, and more than one component that might be outsourced.

reviewers for their invaluable comments and suggestions. The authors also thank Julian Villanueva for programming assistance. The paper also benefited from comments by seminar

The importance of the reuse of components and materials from post-consumer products has been widely recognized in the literature and in practice. In this paper, we address the problem of choosing the appropriate channel structure for the recollection of post-consumer products from customers. Specifically, we consider a manufacturer who has three options for collecting such prod- ucts: (a) she can undertake the recollection effort herself, (b) she can provide suitable incentives to an existing retailer (who already has a distribution channel) to undertake the recollection effort, and (c) she can subcontract the recollection effort to a third party. Based on our observations in the industry, we model the three options described above as decentralized decision-making systems with the manufacturer being the Stackelberg leader. Vhen considering decentralized channels, we find that ceteris paNbus, agencies that are closer to the customer, e.g. retailers, are the most effective undertakers of the recollection effort for the manufacturer. Coordination mechanisms are then characterized which enable the different players to achieve profits that are equivalent to the profits in a coordinated channel.

informs doi 10.1287/mnsc.1090.1010

doi 10.1287/mnsc.1090.1122

In retail markets, slotting allowances have become a common practice, i.e. manufacturers pay lump-sum fees to retailers for initially stocking their products. However, the eff ect of these payments on channel efficiency is still discussed controversially among practitioners and researchers. Due to severe data restrictions, substantial empirical research is rare, with the notable exceptions of Rao and Mahi (2003) and Sudhir and Rao (2006), and has provided contradictory results. Previous theoretic research in the vein of Shaffer (1991) is restricted to a single period of competition and focuses on slotting allowances as the fixed part of a two-part tari. Accordingly, little is known about the impact of one-time slotting allowances on long-run channel efficiency. To address this issue, we build upon Pakes and McGuire (1994) and develop a dynamic model of entry and vertical competition, where strategic actions stem from a single Markov perfect equilibrium. More specifically, retailers decide upon assortments, whereas manufacturers may enter or exit the market and invest in product quality. We allow manufacturers to offer slotting allowances to the retailers and evaluate their impact on long-run industry evolution and, ultimately, firm values and social welfare. Finally, we show under which conditions with respect to information uncertainty, costs and competition slotting allowances are more or less efficiency enhancing.

Tables and Figures............................................................................. v Acknowledgements............................................................................. vi Preface............................................................................................ vii

Les textes publiés dans la série des rapports de recherche HEC n’engagent que la responsabilité deleurs auteurs. La publication de ces rapports de recherche bénéficie d’une subvention du Fonds québécois de la