Failure fee under stochastic demand and information asymmetry

Qin Geng and Marcel Minutolo

International Journal of Production Economics, 2010, vol. 128, issue 1, 269-279

Abstract: We study a failure fee contract designed by a price-setting newsvendor retailer under information asymmetry. Under the contract, the manufacturer must pay the retailer a failure fee if the sales volume misses a target. We propose and compare two types of failure fee contracts: a brand-by-brand contract and a uniform contract. We find that the retailer prefers one to the other depending on parameters.

Keywords: Failure; fee; Slotting; fee; Contract; design; Price-setting; newsvendor; Information; asymmetry; Operations/marketing; interface (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:128:y:2010:i:1:p:269-279

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