Demand signalling under unobservable effort in franchising: linear and nonlinear price contracts
Article Abstract:
A signalling model is analyzed which involves a principal who is privately informed of the high demand for its product. The agent is risk-neutral, is not sure about the demand potential of the principal, and whose effort cannot be monitored by the principal. The model is applied to a new franchisor-franchisee relationship. The analysis seeks to determine whether the principal's signalling ability is affected by moral hazard, to investigate the signalling distortions of a three-part scheme under moral hazard, and to analyze the empirical implications of the distortion of two-part and three-part pricing schemes. The results show that the two-part scheme cannot be used to achieve the first-bet profit, but the three-part scheme can be.
Publication Name: Management Science
Subject: Business, general
ISSN: 0025-1909
Year: 1995
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Information technology impact on process output and quality
Article Abstract:
A conceptual model designed to evaluate the effects of information technology on business process output and quality is developed. In particular, the model examines the US Postal Service's use of the optical character recognition and barcode sorting technologies in its mail sorting processes. The output equation Total Sorting Performed as a function of inputs, quality and input characteristics. Data derived from 46 mail processing centers within a period of 3 yrs is used in the model. Results indicate a direct relationship between the use of IT and mail sorting output. It was shown that input characteristics significantly affected quality and output in the mail sorting process.
Publication Name: Management Science
Subject: Business, general
ISSN: 0025-1909
Year: 1997
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Multiple market entry, cost signalling and entry deterrence
Article Abstract:
Companies may prevent competition from entering the market by manipulating their prices. For instance, the market share of a firm may be eroded if its prices are high enough to encourage other firms to enter the market. On the other hand, the dominant company's low prices can discourage potential entrants. The strategic pricing behavior of dominant firms operating in multiple markets, particularly the combination of their cost signaling effort across markets, is analyzed.
Publication Name: Management Science
Subject: Business, general
ISSN: 0025-1909
Year: 1991
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