The Experts below are selected from a list of 72 Experts worldwide ranked by ideXlab platform
David E. M. Sappington - One of the best experts on this subject based on the ideXlab platform.
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Pricing to preclude sabotage in regulated industries
International Journal of Industrial Organization, 2017Co-Authors: Arup Bose, David E. M. SappingtonAbstract:We characterize the optimal access price and retail price for a vertically-integrated Incumbent Supplier (V) that faces limited competition from a new entrant in the retail sector. The optimal prices provide V with a relatively high wholesale profit margin and a relatively low retail profit margin. Consequently, V has no incentive to raise the costs of its retail rival.
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On the Merits of Antitrust Liability in Regulated Industries
The Journal of Law and Economics, 2016Co-Authors: Arup Bose, Debashis Pal, David E. M. SappingtonAbstract:AbstractWe examine the merits of subjecting an Incumbent Supplier of regulated services to antitrust review. We show that antitrust review can harm consumers even when the review entails no direct costs of implementation. The harm to consumers arises in part because imperfect antitrust review can crowd out more effective regulatory oversight. More generally, antitrust review can usefully complement regulatory oversight but affects the nature of the optimal regulatory policy.
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Exclusive Contracts, Innovation, and Welfare
American Economic Journal: Microeconomics, 2011Co-Authors: Yongmin Chen, David E. M. SappingtonAbstract:We extend Philippe Aghion and Patrick Bolton's (1987) classic model to analyze the equilibrium incidence and impact of exclusive contracts in a setting where research and development (R&D) drives industry performance. An exclusive contract between an Incumbent Supplier and a buyer arises when patent protection and/or the Incumbent's R&D ability are sufficiently pronounced. The exclusive contract generally reduces the entrant's R&D, and can reduce the Incumbent's R&D. Exclusive contracts reduce welfare if the Incumbent's R&D ability is sufficiently limited, but can increase welfare if patent protection and the Incumbent's R&D ability are sufficiently pronounced. (JEL D86, L14, O31)
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On the Irrelevance of Input Prices for Make-or-Buy Decisions
The American Economic Review, 2005Co-Authors: David E. M. SappingtonAbstract:This paper demonstrates that input prices need not reflect the costs of an efficient Incumbent Supplier in order to induce entrants to implement efficient make-or-buy decisions. Because of strategic downstream considerations, entrants may always undertake efficient make-or-buy decisions, regardless of the prices at which they are authorized to buy key inputs from Incumbent Suppliers.
Stephan M. Wagner - One of the best experts on this subject based on the ideXlab platform.
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Supplier development or Supplier switching
International Journal of Production Research, 2012Co-Authors: Gunther Friedl, Stephan M. WagnerAbstract:We study a firm's cost-based sourcing decision of whether to invest in an Incumbent Supplier or switch to an alternative Supplier in order to realise lower purchasing costs. In isolation, it can be shown that the development of an Incumbent Supplier (i.e., a cooperative investment) becomes more attractive, the higher the uncertainty about the price the buying firm can realise on the market and the Incumbent Supplier's cost. Likewise, switching to an alternative Supplier becomes more attractive, the higher the expected value of and the uncertainty about the buying firm's market price. For comparing these two sourcing strategies simultaneously we provide a profit-maximising framework for the buying firm that shows that switching is less recommendable the higher the variance of the Incumbent's cost and if the uncertain maximum demand is negatively correlated with the uncertain Incumbent Supplier's cost. Overall, our study substantially expands the frequently followed approach of basing Supplier development v...
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Supplier Switching Decisions
European Journal of Operational Research, 2007Co-Authors: Stephan M. Wagner, Gunther FriedlAbstract:Abstract In order to maximize profit, a buying firm should continuously search for and access sources which offer more favorable prices. While the literature is replete with works on the formation and development of buyer–Supplier relationships, there is surprisingly only scarce research on the termination of such relationships and Supplier switching. Using the concept of switching costs in a principal-agent framework, we at first analyze whether a firm switches the entire or a partial quantity to an alternative Supplier when there is either symmetric or asymmetric information about the alternative Supplier’s cost structure. Information asymmetry results in inert Supplier switching decisions. Subsequently, we extend our model and take competitive reactions of the Incumbent Supplier and economies of scale effects into consideration. We find conditions under which ‘no’, ‘partial’ and ‘complete’ switching occurs, which depend on the buying firm’s beliefs about the alternative Supplier’s unit costs, switching costs, the price offered by the Incumbent Supplier, and refinements of the price offered by the Incumbent Supplier due to competitive reactions and economies of scale. Broader implications for Supplier relationship management and sourcing strategy decisions are also provided.
Gunther Friedl - One of the best experts on this subject based on the ideXlab platform.
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Supplier development or Supplier switching
International Journal of Production Research, 2012Co-Authors: Gunther Friedl, Stephan M. WagnerAbstract:We study a firm's cost-based sourcing decision of whether to invest in an Incumbent Supplier or switch to an alternative Supplier in order to realise lower purchasing costs. In isolation, it can be shown that the development of an Incumbent Supplier (i.e., a cooperative investment) becomes more attractive, the higher the uncertainty about the price the buying firm can realise on the market and the Incumbent Supplier's cost. Likewise, switching to an alternative Supplier becomes more attractive, the higher the expected value of and the uncertainty about the buying firm's market price. For comparing these two sourcing strategies simultaneously we provide a profit-maximising framework for the buying firm that shows that switching is less recommendable the higher the variance of the Incumbent's cost and if the uncertain maximum demand is negatively correlated with the uncertain Incumbent Supplier's cost. Overall, our study substantially expands the frequently followed approach of basing Supplier development v...
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Supplier Switching Decisions
European Journal of Operational Research, 2007Co-Authors: Stephan M. Wagner, Gunther FriedlAbstract:Abstract In order to maximize profit, a buying firm should continuously search for and access sources which offer more favorable prices. While the literature is replete with works on the formation and development of buyer–Supplier relationships, there is surprisingly only scarce research on the termination of such relationships and Supplier switching. Using the concept of switching costs in a principal-agent framework, we at first analyze whether a firm switches the entire or a partial quantity to an alternative Supplier when there is either symmetric or asymmetric information about the alternative Supplier’s cost structure. Information asymmetry results in inert Supplier switching decisions. Subsequently, we extend our model and take competitive reactions of the Incumbent Supplier and economies of scale effects into consideration. We find conditions under which ‘no’, ‘partial’ and ‘complete’ switching occurs, which depend on the buying firm’s beliefs about the alternative Supplier’s unit costs, switching costs, the price offered by the Incumbent Supplier, and refinements of the price offered by the Incumbent Supplier due to competitive reactions and economies of scale. Broader implications for Supplier relationship management and sourcing strategy decisions are also provided.
Jianwu Sun - One of the best experts on this subject based on the ideXlab platform.
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Research Article Strategic Wholesale Pricing for an Incumbent Supplier Facing with a Competitive Counterpart
2016Co-Authors: Jianwu SunAbstract:permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. We introduce a wholesale pricing strategy for an Incumbent Supplier facing with a competitive counterpart. We propose a profit function which considers both the present loss and future loss from a wholesale price and then study the optimal wholesale prices for different objectives about this profit function for the Incumbent Supplier. First, we achieve an optimal wholesale price for the Incumbent Supplier to maximize his expected profit. Then, to reduce the risk originating from the fluctuation in the competitive Supplier’s wholesale price, we integrate the conditional value-at-risk (CVaR) measure in financial risk management into this study and derive an optimal wholesale price to maximize CVaR about profit for the Incumbent Supplier. Besides, the properties of the two optimalwholesale prices are discussed. Finally, somemanagement insights are suggested for the Incumbent Supplier in a competitive setting. 1
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strategic wholesale pricing for an Incumbent Supplier facing with a competitive counterpart
The Scientific World Journal, 2014Co-Authors: Jianwu SunAbstract:We introduce a wholesale pricing strategy for an Incumbent Supplier facing with a competitive counterpart. We propose a profit function which considers both the present loss and future loss from a wholesale price and then study the optimal wholesale prices for different objectives about this profit function for the Incumbent Supplier. First, we achieve an optimal wholesale price for the Incumbent Supplier to maximize his expected profit. Then, to reduce the risk originating from the fluctuation in the competitive Supplier's wholesale price, we integrate the conditional value-at-risk (CVaR) measure in financial risk management into this study and derive an optimal wholesale price to maximize CVaR about profit for the Incumbent Supplier. Besides, the properties of the two optimal wholesale prices are discussed. Finally, some management insights are suggested for the Incumbent Supplier in a competitive setting.
Christodoulos Stefanadis - One of the best experts on this subject based on the ideXlab platform.
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Sequential innovation, naked exclusion, and upfront lump-sum payments
Economic Theory, 2018Co-Authors: Jay Pil Choi, Christodoulos StefanadisAbstract:We present a potentially benign naked exclusion mechanism that can be applied to sequential innovation; a non-patentable original innovation by the Incumbent Supplier fosters derivative innovation by rivals. In the absence of an appropriate legal framework, the original innovator’s equilibrium exclusivity contracts block subsequent efficient entry even if there is (leader–follower) competition in the contracting phase. However, the legal framework may maximize social welfare by imposing a ban on upfront lump-sum payments in exclusivity contracts (by all Suppliers) combined with an outright ban on exclusivity contracts by the derivative innovator. The former ban precludes the exclusion of socially beneficial derivative innovation by causing the Incumbent Supplier to resort to accommodation, rather than to pure exclusion, strategies. The latter ban complements the former by preventing inefficient or excessive derivative innovation.
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tying investment and the dynamic leverage theory
The RAND Journal of Economics, 2001Co-Authors: Jay Pil Choi, Christodoulos StefanadisAbstract:The idea that an Incumbent Supplier may tie two complementary products to fend off potential entrants is popular among practitioners yet is not fully understood in formal economic theory. This article makes sense of the argument by formally deriving a dynamic version of the old leverage doctrine. We show that when an Incumbent monopolist faces the threat of entry in all complementary components, tying may make the prospects of successful entry less certain, discouraging rivals from investing and innovating. Tie-in sales may reduce consumer and total economic welfare. Copyright 2001 by the RAND Corporation.
