This paper analyses the sources of buyer power and its e¤ect on sellers’ investment in quality improvements. In our model retailers make takeit-or-leave-it o¤ers to a producer and each of them obtains its marginal contribution to total pro…ts (gross of sunk costs). In turn, this depends on the rivalry between retailers in the bargaining process. Rivalry increases when the retailers are less di¤...

Evidence shows that suppliers refrain from investing in energy efficiency (EE) measures because they fear that a buyer with greater bargaining power will use the EE-related cost reductions to push prices down, in the purchase bargaining process, and thereby further reduce the supplier’s profit margin. Suppliers are also discouraged from EE investment by the uncertainty associated with new techn...

In the environment of business‐to‐business e‐commerce, Buyers and sellers in mature industrial markets can turn single transactions into long-term beneficial relationships by a deeper understanding of the complex connection between the two and buyers and sellers are uncertain about their roles. A “must-do” for the sellers, in particular, is to understand patterns of investment and reward,...

I this paper, we study the performance of a sourcing mechanism gaining popularity in industrial procurement environments; a tournament. Under a tournament, a buyer initially procures her parts from two suppliers with possibly different quality levels, for T time periods, i.e., she parallel sources. During this time, the buyer is able to observe noisy signals about the suppliers’ quality. At tim...

This paper studies ex-ante investment incentives of a buyer (a content provider) facing a monopoly input seller (an internet service provider), who employs second-degree price discrimination. As a benchmark, we extend an adverse-selection model by a noncontractible investment stage, which allows the buyer to improve her type. The buyer underinvests due to partial rent extraction by the seller. ...

 Imperfect production processes lead to imperfect products and decrease the profit of a business. Improvement in the production process by increasing the investment cost will decrease the defective percentage of items. This study develops an EPQ model with investments on imperfect production processes under limited capital. An algorithm is developed to derive the replenishment and investment p...

We examine the effect of relationship-specific investment on the use of detailed contracts using data on transactions from a survey of Romanian firms. In those transactions, seller relationship-specific investment increases the amount of contractual detail, while buyer relationship-specific investment decreases it. We interpret these results using a hostages model applied to cash-flow and credi...