EQUILIBRIUM DISTRIBUTION SYSTEMS UNDER RETAILERS' STRATEGIC BEHAVIOR

This paper investigates what are the equilibrium distribution systems in a successive duopoly when retailers hold the power to choose the number of products they wish to market. Since they both can be multi-product sellers, the number of possible channel structures considered is larger than in previous work. Then, we study whether the resulting distribution systems obtained in earlier papers still remain. In particular, whether there are incentives to adopt exclusive distribution agreements, whether a manufacturer is foreclosed from the market and, essentially, whether there exists, at equilibrium, enough inter and intra-brand competition. The analysis shows that provided low brand asymmetry, it is sufficient that retailers hold the power to choose the number of products they wish to distribute to obtain endogenously both inter and intra-brand competition; both retailers become multi-product sellers. However, as the profitability of brands diverges sufficiently, only the most profitable brand will be distributed by both retailers thus only arising intra-brand competition at equilibrium. Neither the exclusive distribution system nor a common distribution system analized in the previous literature appears at equilibrium.Distribution systems, retailer power.

PRODUCT QUALITY AND DISTRIBUTION CHANNELS

We introduce strategic behaviour in assigning a certain distribution channel to a product of a particular quality. We propose a variety of models to analyze and study some of the determinants of the choice of distribution channels. Taking the Gabszewicz and Thisse's (1979) model as a benchmark, we first study whether there exist strategic incentives for delegation of sales in a vertically differentiated duopoly. Secondly, product quality is associated with a particular distribution channel. Finally, the model is extended to account for multi-quality production. The resulting equilibria of every game depend on the relative market profitability, the degree of vertical differentiation (i.e. the relative marginal utility of income for quality and the non-buying option), and hence on the intensity of inter-quality and intra-quality competition. In all of the games analyzed, delegation appears as an equilibrium action. In the first game it is a dominant action for both manufacturers. In the second game, at least one of the manufacturers delegates sales. Whether it is one or both crucially depends on market profitability for each quality and the intensity of inter-quality competition. In the third of the games, the single-product manufacturer delegates sales at equilibrium whereas the multi-product manufacturer delegates only one of the qualities. The multi-product manufacturer employs wholesale prices together with the decision of not delegating both qualities to optimally combine the trade-off between the intensity of intra-quality competition and intra-firm competition.vertical differentiation, distribution channels, multi-quality production.

STORE VS. NATIONAL BRANDS: A PRODUCT LINE MIX PUZZLE

This paper examines retailers' strategic decisions about store brand introduction when each retailer can stock a limited number of brands. The different product line mix equilibria depend on demand parameters that measure the cross-effect across national and store brands and the cross-effect within each brand type, thus leading to a simple testable implication. Store brand introduction is determined by the combination of the three effects that result from replacing a national brand by a store brand; the direct effect, the exclusivity effect and the in-store effect. Interestingly enough, we identify conditions under which similar retailers take different decisions concerning their product line mix.store brands, retail duopoly, product line mix

Vertical integration and exclusivities in maritime freight transport

A key recent theme in maritime freight transport is the involvement of shipping lines in terminal management. Such investments are costly but allow liners to provide better service. Most of these new terminals are dedicated terminals but some are non-exclusive and let rivals access them for a fee. In this paper, we show that a shipping line that builds its own terminal finds it strategically profitable i) to continue routing part of its cargo through the open port facilities, and ii) to keep its terminal non-exclusive. In this way, the liner investor pushes part of the rival's freight from the open to the new terminal. Besides, under non-exclusivities, the shipping lines offer a wider variety of services, total freight increases and the resulting equilibrium fares are higher than with a dedicated terminal.freight transport, shipping lines, vertical integration

The Strategic Role of Information Asymmetry on Demand for the Multinational Enterprise

We study how asymmetric information impinge on oligopolistic firms’ decision between direct investment and exports in a game-theoretic model with Bayesian learning. Host firms have superior information about market demand and foreign firms can improve their knowledge if foreign direct investment (FDI) is undertaken. In addition to the well-known tension between the fixed set-up costs of investment, the additional variable costs of exports and oligopoly sizes, the incentive to invest abroad is explained by the strategic learning effect. FDI may be observed even if foreign firms are pessimistic or trade costs are zero. Interestingly, compared with the certainty equivalent, the equilibrium number of investors is larger when foreign firms hold optimistic beliefs or, if these are pessimistic, when the strategic learning effect outweighs the conjecture effect.Asymmetric information; Bayesian learning; FDI; international oligopoly

Trade liberalization in vertically related markets

This paper looks into the desirability of trade liberalization for manufacturers, retailers and consumers. The analysis compares the move from the autarky situation to either one of free trade that entails a change in the distribution system or not. We also examine whether the interests of manufacturers and retailers about the preferred distribution system coincide, provided trade opens. We find that market integration is beneficial to all agents only under certain conditions on the degree of market asymmetry and the degree of product differentiation. Interestingly, if integration entails a change in the distribution system, the conflict between manufacturers and retailers strengthens since only retailers prefer free trade when markets are not too asymmetric and when interbrand competition is sufficiently strong. Furthermore, consumers can be harmed by trade and, in a setting without exclusivities, one country may experience a welfare decrease. Finally, the analysis of the strategic choice concerning exclusivity clauses uncovers that retailers and manufacturers never agree about their preference for endogenous distribution systems.International competition, vertical relationships.

Strategic policy and international economic integration

In a context of economic integration, we analyse the strategic effect of wo policies: merger policy and state aid policy. When governments play a Stackelberg policy game before firms compete in the market we find that: a) only under certain conditions, the leader country chooses a merger policy and, b) there is a policy equivalence in welfare terms for the follower. A centralised policy decision is welfare improving relative to the strategic policy game and equals total welfare of the area under autarky. Besides, there always exists a social incentive to propose mergers and both, the state aid level and the state aid expenditure, are lower.Merger policy, state aid, market enlargement

Theoretical and experimental insights on firms' internationalization decisions under uncertainty

We revisit and extend previous theoretical work on internationalization decisions by firms which are imperfectly informed on the state of the demand in the market into which they are planning to export or enter through foreign direct investment (FDI). The latter is a costly strategy mitigating the international firm's demand uncertainty, while the local firm is perfectly informed. We report results from an experimental test of the aforementioned framework which confirm dominant strategy play by local firms under both the good and bad states of the local demand. Also, the prediction that the magnitude of the FDI-specific cost determines whether foreign firms enter via FDI is confirmed in qualitative terms. However, in the case in which FDI is the dominant strategy under risk neutrality, less than full FDI adoption is obtained. We also find an unexpected interaction between the internationalization decision and the market strategy once entry has occurred, indicating the presence of relevant behavioral and strategic factors which are not anticipated by the theoretical model

Strategic investments and multinational firms under oligopoly

We have developed a simple oligopoly model in which foreign direct investment (FDI) decisions are determined in an endogenous fashion. There is a host oligopoly facing competition from a foreign oligopoly in the form of either foreign investment or exports. Then, we propose a multi-stage game to stress the role played by the interactions among foreign rival firms´ decisions, and we identify some of the determinants of a switch from an exporting strategy to an FDI strategy. A delay in the investment is more likely found for big enough country-specific fixed costs and low values of the oligopoly profitability. Our model provides a theoretical basis which leads to predictions in line with previous empirical studies.

A Transient Expression of Prospero Promotes Cell Cycle Exit of Drosophila Postembryonic Neurons through the Regulation of Dacapo

Cell proliferation, specification and terminal differentiation must be precisely coordinated during brain development to ensure the correct production of different neuronal populations. Most Drosophila neuroblasts (NBs) divide asymmetrically to generate a new NB and an intermediate progenitor called ganglion mother cell (GMC) which divides only once to generate two postmitotic cells called ganglion cells (GCs) that subsequently differentiate into neurons. During the asymmetric division of NBs, the homeodomain transcription factor PROSPERO is segregated into the GMC where it plays a key role as cell fate determinant. Previous work on embryonic neurogenesis has shown that PROSPERO is not expressed in postmitotic neuronal progeny. Thus, PROSPERO is thought to function in the GMC by repressing genes required for cell-cycle progression and activating genes involved in terminal differentiation. Here we focus on postembryonic neurogenesis and show that the expression of PROSPERO is transiently upregulated in the newly born neuronal progeny generated by most of the larval NBs of the OL and CB. Moreover, we provide evidence that this expression of PROSPERO in GCs inhibits their cell cycle progression by activating the expression of the cyclin-dependent kinase inhibitor (CKI) DACAPO. These findings imply that PROSPERO, in addition to its known role as cell fate determinant in GMCs, provides a transient signal to ensure a precise timing for cell cycle exit of prospective neurons, and hence may link the mechanisms that regulate neurogenesis and those that control cell cycle progression in postembryonic brain development