Competing manufacturers in a retail supply chain: On contractual form and coordination

It is common for a retailer to sell products from competing manufacturers. How then should the firms manage their contract negotiations? The supply chain coordination literature focuses either on a single manufacturer selling to a single retailer or one manufacturer selling to many (possibly competing) retailers. We find that some key conclusions from those market structures do not apply in our setting, where multiple manufacturers sell through a single retailer. We allow the manufacturers to compete for the retailer's business using one of three types of contracts: a wholesale-price contract, a quantity-discount contract, or a two-part tariff. It is well known that the latter two, more sophisticated contracts enable the manufacturer to coordinate the supply chain, thereby maximizing the profits available to the firms. More importantly, they allow the manufacturer to extract rents from the retailer, in theory allowing the manufacturer to leave the retailer with only her reservation profit. However, we show that in our market structure these two sophisticated contracts force the manufacturers to compete more aggressively relative to when they only offer wholesale-price contracts, and this may leave them worse off and the retailer substantially better off. In other words, although in a serial supply chain a retailer may have just cause to fear quantity discounts and two-part tariffs, a retailer may actually prefer those contracts when offered by competing manufacturers. We conclude that the properties a contractual form exhibits in a one-manufacturer supply chain may not carry over to the realistic setting in which multiple manufacturers must compete to sell their goods through the same retailer. © 2010 INFORMS.

One sound or two? Object-related negativity indexes echo perception.

The ability to isolate a single sound source among concurrent sources and reverberant energy is necessary for understanding the auditory world. The precedence effect describes a related experimental finding, that when presented with identical sounds from two locations with a short onset asynchrony (on the order of milliseconds), listeners report a single source with a location dominated by the lead sound. Single-cell recordings in multiple animal models have indicated that there are low-level mechanisms that may contribute to the precedence effect, yet psychophysical studies in humans have provided evidence that top-down cognitive processes have a great deal of influence on the perception of simulated echoes. In the present study, event-related potentials evoked by click pairs at and around listeners' echo thresholds indicate that perception of the lead and lag sound as individual sources elicits a negativity between 100 and 250 msec, previously termed the object-related negativity (ORN). Even for physically identical stimuli, the ORN is evident when listeners report hearing, as compared with not hearing, a second sound source. These results define a neural mechanism related to the conscious perception of multiple auditory objects.

The price of innovation: new estimates of drug development costs.

The research and development costs of 68 randomly selected new drugs were obtained from a survey of 10 pharmaceutical firms. These data were used to estimate the average pre-tax cost of new drug development. The costs of compounds abandoned during testing were linked to the costs of compounds that obtained marketing approval. The estimated average out-of-pocket cost per new drug is 403 million US dollars (2000 dollars). Capitalizing out-of-pocket costs to the point of marketing approval at a real discount rate of 11% yields a total pre-approval cost estimate of 802 million US dollars (2000 dollars). When compared to the results of an earlier study with a similar methodology, total capitalized costs were shown to have increased at an annual rate of 7.4% above general price inflation.