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Experimental Investigation of Supplier-Retailer Contracts: The Wholesale Price Contract

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  • Claudia Keser

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  • Giuseppe A. Paleologo
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    Abstract

    We examine decision making in a simple supplier-retailer wholesale price contract in the experimental economics laboratory. We observe wholesale prices and order quantities below the game-theoretical predictions. The supply chain’s efficiency is as predicted but profits are more equitably allocated. Cette étude en économie expérimentale examine les contrats de prix en gros négociés entre un détaillant et un vendeur. Nous observons que les prix et les quantités négociés sont en dessous des prévisions tirées du modèle retenue en théorie des jeux. Les résultats expérimentaux indiquent que l’efficacité de la chaîne d’approvisionnement est inférieur à 100 % tel que prédit par le modèle. Par ailleurs, les profits sont alloués de façon plus équitable que l’allocation prédite par le modèle.

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    Bibliographic Info

    Paper provided by CIRANO in its series CIRANO Working Papers with number 2004s-57.

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    Date of creation: 01 Nov 2004
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    Handle: RePEc:cir:cirwor:2004s-57

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    Related research

    Keywords: supply chain coordination; industrial organization; experimental economics; coordination dans la chaîne d’approvisionnement; organisation industrielle; économie expérimentale;

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    References

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    1. Selten,Reinhard & Mitzkewitz,Michael & Uhlich,Gerald, . "Duopoly strategies programmed by experienced players," Discussion Paper Serie B 106, University of Bonn, Germany.
    2. Martin A. Lariviere & Evan L. Porteus, 2001. "Selling to the Newsvendor: An Analysis of Price-Only Contracts," Manufacturing & Service Operations Management, INFORMS, vol. 3(4), pages 293-305, May.
    3. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory Of Fairness, Competition, And Cooperation," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 817-868, August.
    4. Barry Alan Pasternack, 1985. "Optimal Pricing and Return Policies for Perishable Commodities," Marketing Science, INFORMS, vol. 4(2), pages 166-176.
    5. Brian Tomlin, 2003. "Capacity Investments in Supply Chains: Sharing the Gain Rather Than Sharing the Pain," Manufacturing & Service Operations Management, INFORMS, vol. 5(4), pages 317-333, November.
    6. Claudia Keser, 2000. "Strategically Planned Behavior in Public Good Experiments," CIRANO Working Papers 2000s-35, CIRANO.
    7. Dawn Barnes-Schuster & Yehuda Bassok & Ravi Anupindi, 2002. "Coordination and Flexibility in Supply Contracts with Options," Manufacturing & Service Operations Management, INFORMS, vol. 4(3), pages 171-207, May.
    8. Maurice E. Schweitzer & Gérard P. Cachon, 2000. "Decision Bias in the Newsvendor Problem with a Known Demand Distribution: Experimental Evidence," Management Science, INFORMS, vol. 46(3), pages 404-420, March.
    9. Andy A. Tsay, 1999. "The Quantity Flexibility Contract and Supplier-Customer Incentives," Management Science, INFORMS, vol. 45(10), pages 1339-1358, October.
    10. Keser, Claudia & Willinger, Marc, 2000. "Principals' principles when agents' actions are hidden," International Journal of Industrial Organization, Elsevier, vol. 18(1), pages 163-185, January.
    11. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
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    Cited by:
    1. Elahi, Ehsan & Lamba, Narasimha & Ramaswamy, Chinthana, 2013. "How can we improve the performance of supply chain contracts? An experimental study," International Journal of Production Economics, Elsevier, vol. 142(1), pages 146-157.
    2. Wu, Diana Yan, 2013. "The impact of repeated interactions on supply chain contracts: A laboratory study," International Journal of Production Economics, Elsevier, vol. 142(1), pages 3-15.

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