Stackelberg Equilibria in a Multiperiod Vertical Contracting Model with Uncertain and Price-Dependent Demand

We consider explicit formulae for equilibrium prices in a continuous-time vertical contracting model. A manufacturer sells goods to a retailer, and the objective of both parties is to maximize expected profits. Demand is an Itô-Lévy process, and to increase realism, information is delayed. We provide complete existence and uniqueness proofs for a series of special cases, including geometric Brownian motion and the Ornstein-Uhlenbeck process, both with time-variable coefficients. Moreover, explicit solution formulae are given, so these results are operational. An interesting finding is that information that is more precise may be a considerable disadvantage for the retailer.

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Stackelberg equilibria in a continuous-time vertical contracting model with uncertain demand and delayed information

Journal of Applied Probability ◽

10.1017/s002190020002129x ◽

2014 ◽

Vol 51 (A) ◽

pp. 213-226

Author(s):

Bernt Øksendal ◽

Leif Sandal ◽

Jan Ubøe

Keyword(s):

Continuous Time ◽

Variable Coefficients ◽

Uncertain Demand ◽

Uhlenbeck Process ◽

Delayed Information ◽

Equilibrium Prices ◽

Special Cases ◽

Explicit Formulae ◽

Contracting Model ◽

Vertical Contracting

We consider explicit formulae for equilibrium prices in a continuous-time vertical contracting model. A manufacturer sells goods to a retailer, and the objective of both parties is to maximize expected profits. Demand is an Itô-Lévy process, and to increase realism, information is delayed. We provide complete existence and uniqueness proofs for a series of special cases, including geometric Brownian motion and the Ornstein-Uhlenbeck process, both with time-variable coefficients. Moreover, explicit solution formulae are given, so these results are operational. An interesting finding is that information that is more precise may be a considerable disadvantage for the retailer.

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Contract institutions in the Russian economy: The sphere of state, municipal, and regulated procurement

Voprosy Ekonomiki ◽

10.32609/0042-8736-2017-11-93-110 ◽

2017 ◽

pp. 93-110 ◽

Cited By ~ 3

Author(s):

O. Anchishkina

Keyword(s):

Economic Growth ◽

Theoretical Model ◽

Market Structure ◽

Market Equilibrium ◽

Statistical Evidence ◽

Market Model ◽

Market Behavior ◽

Database Analysis ◽

Russian Economy ◽

Contracting Model

The article synthesizes information on database analysis of state, municipal, and regulated procurement through which Russian contract institutions and the market model are investigated. The inherent uncertainty of quantity indicators on contracting activities and process is identified and explained. The article provides statistical evidence for heterogeneous market structure in state and municipal procurement, and big player’s dominance. A theoretical model for market behavior, noncooperative competition and collusion is proposed, through which the major trends are explained. The intrinsic flaws and failure of the current contracting model are revealed and described. This ineffectiveness is regarded to be not a limitation, but a challenge to be met. If responded to, drivers for economic growth and market equilibrium will be switched on.

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