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Failure fee under stochastic demand and information asymmetry

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  • Geng, Qin
  • Minutolo, Marcel C.

Abstract

We study a failure fee contract designed by a price-setting newsvendor retailer under information asymmetry. Under the contract, the manufacturer must pay the retailer a failure fee if the sales volume misses a target. We propose and compare two types of failure fee contracts: a brand-by-brand contract and a uniform contract. We find that the retailer prefers one to the other depending on parameters.

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Bibliographic Info

Article provided by Elsevier in its journal International Journal of Production Economics.

Volume (Year): 128 (2010)
Issue (Month): 1 (November)
Pages: 269-279

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Handle: RePEc:eee:proeco:v:128:y:2010:i:1:p:269-279

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Web page: http://www.elsevier.com/locate/ijpe

Related research

Keywords: Failure fee Slotting fee Contract design Price-setting newsvendor Information asymmetry Operations/marketing interface;

References

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