Optimal duration, rate and price when online retailers offer installment payment services

Purpose Online retailers have become gradually popular to offer consumers installment payment services in the past few years. This paper aims to study how to determine the duration and rate of installment payment services, as well as the price of products to increase online retailers’ profits. Design/methodology/approach By modeling the utility functions, the behavior of consumers for strategic choosing the payment method and payment timing is analyzed. Thus, the market segments are obtained through the comparison of the consumer’s utilities. Combined with the given assumptions, the installment payment strategies for online retailers is investigated. This paper focuses on the impact of installment payment services on consumers’ purchasing behavior and online retailers’ profits by modeling and comparative analysis. No installment payment service as a benchmark, it is demonstrated whether online retailers can obtain more profits by offering installment payment services or what are the applicable conditions for installment payments. Findings If the installment payment service is offered, online retailers can gain more profits and need to adopt appropriate strategies based on different market conditions. During the depression or the peak shopping season, online retailers should take the strategy of free installment rate, and moderately increasing the product price of no installment service. When market demand is stable or during non-peak season, online retailers need to set a higher installment rate and maintain the product price without installment service. Finally, online retailers should determine the maximum duration of installments they can afford based on own risk control cost and allow consumers to freely choose the length of the installment within the duration limit. Originality/value First, the authors deeply analyze consumers’ payment and purchase behavior when the online retailer offers the installment payment service. Then, it is theoretically proved why many online retailers have offered installment payment services to consumers from a profit perspective. Finally, this paper proposes the optimal duration of installments, installment rate and product price in different market environments for online retailers, to provide theoretical basis and managerial insights for the development of installment payment service in online shopping.

Coordinating Project Outsourcing Through Bilateral Contract Negotiations

Problem definition: Project outsourcing has been a pronounced trend in many industries but is also recognized as a major cause for project delays. We study how companies can coordinate outsourced projects with uncertain completion times through bilateral contract negotiations. Academic/practical relevance: Misaligned subcontractor incentives may result in substantial losses to both project clients and subcontractors. Coordinating subcontractors’ efforts through proper contracts is imperative to the success of project outsourcing. Most previous studies on project contracting have not addressed subcontractors’ bargaining powers or the dynamic bargaining process in negotiations. We fill in this gap by studying bilateral bargaining between the client and subcontractors, which better reflects real-world negotiations. Methodology: We model project contract negotiations as a multiunit bilateral bargaining game. We derive the conditions such that bilateral negotiations can achieve system coordination and characterize the equilibrium negotiation outcomes. We then compare the conditions and equilibria under various model settings to study their impact on project contracting. Results: Our study uncovers how the coordination of project outsourcing is impacted by the contract form, bargaining power structure, precedence network topology, payment timing, external opportunities, and negotiation protocols. For single-task projects, the widely used fixed-price (cost-plus) contract can achieve system coordination only when the subcontractor (client) possesses full bargaining power. Cost-sharing and time-based incentive contracts, which perform well for single-task projects, may not be effective for projects with parallel tasks when any subcontractor’s bargaining power is sufficiently high. Projects with serial tasks can be coordinated only under certain extreme bargaining power structures. Delaying payments always exacerbates the incentive misalignment. Managerial implications: Our analysis provides insights and guidelines to companies regarding how to select proper contract forms and payment timing schemes, based on the characteristics of the projects and subcontractors, to ensure the effectiveness of project outsourcing. Our results also highlight the importance of bargaining modeling in project contracting.

Categorizing Organic Grain Buyers in the Midwestern United States

Though the demand for organic grains is increasing, domestic supply is falling short. One of the major barriers to entry in the organic grain market for producers is the inability to identify an appropriate buyer, as well as a lack of understanding buyer perceptions, assistance offered, and contracting strategies. While classifications of organic producers exist, and have helped researchers and policymakers develop incentives, no such classification exists for organic grain buyers. Previous works have identified communication gaps between buyers and producers of organic grains, yet buyers’ beliefs and requirements regarding organic grain are not well documented in literature. Drawing from the personal values theory, this study proposes the categorization of organic grain buyers based on their commitment to the organic industry, with categories such as committed organic and pragmatic organic. We profiled grain purchases, buying arrangements, grain requirements, relationships, and business characteristics by buyer type. Means comparisons among groups showed that committed organic buyers seem to be primarily driven by social focus values, while pragmatic organic buyers tend to show values related to personal focus. A principal component analysis suggested the existence of three components constructed by contract-, perceptions-, and relationship-oriented characteristics in buyers. Our results allowed us to identify potential marketing opportunities by providing insight regarding types of assistance offered by buyers, how to build and maintain a relationship with buyers, types of purchasing agreements used, and purchasing agreement characteristics and requirements. Industry stakeholders can use this information to identify appropriate buyers based on times contracts are signed, payment timing, storage and transportation requirements, and the amount of organic practice documentation buyers require. Our categorization can provide the foundation for further research in the organic grain industry.

Study of dividend policies in periods pre and post-merger

This study examines the policies of pre- and post- merger dividends. The emphasis here is on the timing of payment of dividends and its signal role when the merger is considered successful. Our analysis is purely descriptive and involves the merger of CVS and Caremark listed on the NY Stock Exchange and conducted in 2006. The findings indicate the relevance of dividend payment timing as the merger of success signal since acquiring company tries to improve its payment timing and the amount to be paid. This proves the existence of complementarities between the signaling hypothesis by the amount of dividend to be paid and payment timing and confirms the existence of a dynamic adjustment process to a target level.