EXPRESS: Perceived vs. Negotiated Discounts: The Role of Advertised Reference Prices in Price Negotiations

Retailers routinely present a posted price together with a higher advertised reference price, in an effort to evoke a perception of the discount the consumer is receiving. If prices can be negotiated though, what impact does this initial perceived discount (IPD) have on the ultimate discount, demand, and revenue? With data from consumers of a large durable goods retailer, in a natural decision-making environment, this study provides evidence that a greater IPD is associated with smaller negotiated discounts. Then, a lab experiment involving negotiation and purchase decisions for multiple products, with randomly assigned values of the IPD, establishes that a $1 increase in IPD lowers the negotiated discount by 4.7 cents. Furthermore, 75% of this decrease can be attributed to reduction in the participants' likelihood to initiate a negotiation. Under bargaining, almost half of the increase in revenue from a higher IPD stems from an increase in the negotiated price, which is unlike fixed pricing, in which setting an increase in IPD affects revenue only through changes in demand. Sellers also have a greater incentive to set exaggerated advertised reference prices in bargaining contexts, compared with fixed pricing. These findings in turn have implications for researchers, retailers, and consumers.

THE COMPETITIVENESS ANALYSIS OF EDIBLE BIRD NEST INDUSTRY IN MALAYSIA: APPLYING PORTER'S FIVE FORCE

The demand for EBN is continuous to growth and about 70 percent of world demand still cannot be fulfilled. Unfortunately, Malaysia only contributes 20 percent from world demand. The aims for this industry are to contribute about RM5 billion to Malaysian agricultural export and to achieve at least 40 percent of world demand. As being one of the most demanded EBN and being in the competition for leadership in world bird nest market, it can be specified that new market entrants and investments are important to fulfil the aims of government to this industry and for the growth of EBN industry. Thus, the objectives of this paper are to analysing the current competition condition of EBN industry in Malaysia and its opportunities for new entrants. This study revealed that the need of a huge capital and knowledge to conduct this business is essential and must come together. There is relatively low threat of substitution if the business premise is a shop lot. Despite the existence of buyer power in price negotiations, swiftlet house owners too could influence the process and assure themselves of higher markups when they organise a tender process with the help of the rancher’s association. Threat of rivalry is low especially with the setup of the rancher’s association to help each member who faced problems.

Challenges in valuing and paying for combination regimens in oncology: reporting the perspectives of a multi‐stakeholder, international workshop

Background It is increasingly common for two or more treatments for cancer to be combined as a single regimen. Determining value and appropriate payment for such regimens can be challenging. This study discusses these challenges, and possible solutions. Methods Stakeholders from around the world attended a 2-day workshop, supported by a background paper. This study captures key outcomes from the discussion, but is not a consensus statement. Results Workshop attendees agreed that combining on-patent treatments can result in affordability and value for money challenges that delay or deny patient access to clinically effective treatments in many health systems. Options for addressing these challenges include: (i) Increasing the value of combination therapies through improved clinical development; (ii) Willingness to pay more for combinations than for single drugs offering similar benefit, or; (iii) Aligning the cost of constituent therapies with their value within a regimen. Workshop attendees felt that (i) and (iii) merited further discussion, whereas (ii) was unlikely to be justifiable. Views differed on the feasibility of (i). Key to (iii) would be systems allowing different prices to apply to different uses of a drug. Conclusions Common ground was identified on immediate actions to improve access to combination regimens. These include an exploration of the legal challenges associated with price negotiations, and ensuring that pricing systems can support implementation of negotiated prices for specific uses. Improvements to clinical development and trial design should be pursued in the medium and longer term.

The Unintended Consequences of Headquarters’ Involvement in Decentralized Transfer Price Negotiations: Experimental Evidence

This study investigates how headquarters’ involvement affects the efficiency of transfer price negotiations. Although prior research explores autonomous transfer price negotiations, evidence suggests that headquarters can become involved in these negotiations, particularly after they fail. Although the likely intention of headquarters’ involvement is to overcome inefficiencies arising from decentralized managers’ inability to agree on a transfer price, we suggest that such involvement can reduce agreement frequency and the efficiency of transfer pricing in coordinating transfers between divisions. Reduced agreement may occur because involvement can reduce managers’ perceived responsibility for the negotiation outcome and because they may expect headquarters’ decision to be more favorable for them than a negotiated price. Headquarters’ involvement can also reduce the coordination efficiency of transfer pricing because of information asymmetries and headquarters’ decision biases in interpreting negotiation failure and using available information. In an experiment, we manipulate whether headquarters’ involvement is absent or present. We also manipulate whether headquarters suggests a nonbinding price (weak involvement) or whether it imposes a price on divisions (strong involvement). Consistent with our predictions, we find that headquarters’ involvement reduces the frequency of negotiation agreement and the coordination efficiency of transfer pricing. Efficiency is reduced more when involvement is strong rather than weak. We contribute to research by studying managers’ negotiation behavior in the realistic setting of potential headquarters’ involvement and by providing evidence on headquarters’ biased perceptions of negotiation impasse and the unintended consequences of its involvement. This paper was accepted by Brian Bushee, accounting.

The Role of Advance Purchasing Commitments in Government Drug Price Negotiations: Lessons From the COVID-19 Response

Among the various approaches to address rising prescription drug costs, one option is to allow the federal government to negotiate prices directly with drug manufacturers. Debates over the appropriate negotiating approach have occurred on several dimensions,1 including the number of drugs eligible for negotiation, the levers that would be implemented to obtain lower prices, the incentives necessary to ensure that all parties negotiate in good faith, and what specific populations should have access to the negotiated price. In 2019, the US House of Representatives passed the most recent proposal to allow the federal government to negotiate prices—H.R.3, The Elijah E. Cummings Lower Drug Costs Now Act—reflecting policy decisions on many of these issues.2 (Am J Public Health. Published online ahead of print January 28, 2021: e1–e6. https://doi.org/10.2105/AJPH.2020.306109 )

EXPRESS: Salesperson Dual Agency in Price Negotiations

When should B2B firms encourage their salespeople to advocate for the customer in pricing negotiations? This research extends dual agency theory to the sales domain to address this question. In Study 1, the authors examine discount negotiations with secondary data from a major U.S. industrial distributor. They find that the customer and seller both experience the most favorable outcomes when the salesperson engages in both customer advocacy toward the seller and seller advocacy toward the customer; either type of advocacy alone is counterproductive. Study 2 confirms these results using matched survey, pricing, and profit data and demonstrates a key boundary condition: broad customer–seller ties enable the synergy between customer advocacy and seller advocacy by enhancing the firms’ abilities to monitor the salesperson. In Study 3, experiments with B2B buyers replicate key findings and provide evidence for theorized mechanisms. This research emphasizes the interdependence between the salesperson’s dual roles and demonstrates how the salesperson can serve as an effective agent of both the customer and seller, thereby mitigating challenges associated with role conflict.