Vertical Contracts with Endogenous Product Selections: An Empirical Analysis of Vendor Allowance Contracts
نویسنده
چکیده
Producers frequently provide retailers with financial incentives to secure distribution of their products. These payments often take the form of vendor allowances: lumpsum transfers to retailers that do not directly depend on quantity sold. I study the equilibrium effects of the use of vendor allowances when retailers’ product selections are endogenous. I find that these payments are important for retailers’ profitability, corresponding to 4.21% of retailers’ revenues. A counterfactual restricts contracts to include only wholesale prices. Simulations predict that, absent vendor allowances, retailers’ ability to strategically exclude products and extract rents from producers is
منابع مشابه
Vertical Contracts and Endogenous Product Selections: An Empirical Analysis of Vendor Allowance Contracts∗
Strategic retailers choose assortments taking consumer preferences, downstream competition, and vertical contracts into account. Thus, vertical contracts cannot be understood in isolation from retailers’ endogenous product selections. Producers frequently provide retailers with financial incentives to gain distribution of their products. These payments often take the form of vendor allowances: ...
متن کاملSignaling and Contract Choice in After-Sales Service
The extant literature on after-sales service support suggests an implicit consensus around the (Pareto) superiority of performance-based contracts (PBC) over traditional time-and-material contracts. However, when product technology is new, a setting in which the vendor possesses superior information on product reliability, there is compelling evidence to suggest that buyers prefer the tradition...
متن کاملDeterminants of vendor profitability in two contractual regimes: an empirical analysis of enterprise resource planning projects
In this paper, we investigate the effects of four determinants of vendor profitability in enterprise resource planning (ERP) outsourcing projects under two contractual regimes: fixed price (FP) contracts and time and material (TM) contracts. We hypothesize that effect sizes are larger under FP contracts than under TM contracts. From a transaction cost economics perspective, we hypothesize that ...
متن کاملIntroducing the Time Value of Money in a Non-consignment Vendor Managed Inventory Model
Vendor managed inventory (VMI) is an integrated approach for buyer–vendor coordination, according to which the vendor (supplier or manufacturer) decides on the appropriate buyer’s (retailer’s) inventory levels. The time value of money has not traditionally been considered in evaluating VMI supply chain’s total inventory cost in any studies up to now. Therefore, in the present study a new model ...
متن کاملAn Empirical Study on the Importance of Psychological Contract Commitment in Information Systems Outsourcing
In IS outsourcing relationship literature, research has focused on detailed legal contracts and partnerships. We investigate the role of psychological contracts between client and vendor in the IS outsourcing context. The aim of this paper is to put the concept “psychological contract commitment” (PCC) under the spotlight, finding out its mediating effects between legal contracts/partnerships a...
متن کامل