The Role of Market Evolution in Channel Contracting
| Autor: | Long Gao, Birendra K. Mishra |
|---|---|
| Rok vydání: | 2019 |
| Předmět: |
distribution channel
Operations Research Property (philosophy) contracting information asymmetry Computer science Strategy and Management media_common.quotation_subject Management Science and Operations Research Market evolution Inertia Microeconomics Information asymmetry Information and Computing Sciences 0502 economics and business Econometrics Economics 050207 economics Distortion (economics) Tourism and Services Private information retrieval media_common 050208 finance Information sharing 05 social sciences Autocorrelation Commerce Management market evolution information sharing Constant (mathematics) Communication channel |
| Zdroj: | MANAGEMENT SCIENCE, vol 65, iss 5 Gao, L; & Mishra, BK. (2018). The Role of Market Evolution in Channel Contracting. UC Riverside: Retrieved from: http://www.escholarship.org/uc/item/47s2046c Management Science, vol 65, iss 5 |
| Popis: | Real markets evolve over time. They often exhibit complex behaviors, such as auto-correlation, continuity, and non-stationarity. How do these behaviors affect channel contracting? We study the problem in a bilateral channel where the retailer has private information on evolving market conditions. We characterize the optimal contract under arbitrary market evolution. The central notion is market inertia: it prices retailer's information advantage, dictates price and quantity response over time, and determines the contract complexity. Using market inertia, we identify a general property - stochastic linearity - that justifies the use of simple contracts for a much larger class of channel conditions. For practitioners, we offer refined guidance: (i) when the market has linear dynamics, simple contracts are sufficient; (ii) when the market is continuous, the quantity distortion should be pervasive; (iii) when the market is non-stationary, the distortion can vanish, intensify, stay constant, or even go non-monotonic over time. By highlighting the central role of realistic market behaviors, this paper advances our understanding of channel theory and practice. |
| Databáze: | OpenAIRE |
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