T price for a product may be set too low, causing the seller to leave money on the table, or too high, driving away potential buyers. Contingent pricing can be useful in mitigating these problems. In contingent pricing arrangements, price is contingent on whether the seller succeeds in obtaining a higher price within a specified period. We show that if the probability of obtaining the high pric...

We challenge the view that the presence of powerful buyers stifles suppliers’ incentives to innovate. Following Katz (1987), we model countervailing (or buyer) power as the ability of, in particular, large buyers to substitute away from a given supplier. We employ a bargaining framework and find that the presence of larger and more powerful buyers increases a supplier’s incentives to reduce mar...

This paper reconsiders the analysis of the competitive effects of buyer contracts. In contrast to the previous literature, we do not impose ex ante asymmetry on the contracting opportunities of firms. Rather, we consider a market composed of two segments involving small anonymous and large nonanonymous buyers. While the large buyers can contract with each other and any firm in the market, it is...

Trade credit represents a substantial portion of short-term credit for most firms. A trade credit decision is usually limited to a comparison of the effective cost of trade credit with the annual cost of borrowing. If the cost of not taking the cash discount exceeds the firm’s borrowing cost, the decision is to take the cash discount. This article examines traditional trade credit analysis, and...

We study a Bertrand game where two sellers supplying products of different and unverifiable qualities can outwit potential clients through their (costly) deceptive advertising. We characterize a class of pooling equilibria where sellers post the same price regardless of their quality and low quality ones deceive buyers. Although in these equilibria low quality goods are purchased with positive ...

Managing buyers’ trust and perceived risk through an effective feedback mechanism is central to electronic marketplace success (Pavlou and Gefen, 2004). This research note aims to include the role of conflict in our understanding of buyer behavior in online markets. Based on psychological contract violation theory, we propose that an experience of conflict causes buyers to shift their mindset f...