January  2017, 13(1): 113-133. doi: 10.3934/jimo.2016007

Intrinsic impediments to category captainship collaboration

1. 

Université de Toulouse, Toulouse Business School, Toulouse, France

2. 

Louvain School of Management and CORE, Université catholique de Louvain, B-1348 Louvain-la-Neuve, Belgium

*Corresponding author: Per J. Agrell

Received  December 2014 Revised  December 2015 Published  March 2016

Category captainship, the approach where retailers use manufacturer-retailer collaboration, is a common way to leverage resources and capabilities in order to improve the sales/shelf performance ratio. However, evidence suggests that the depth and effectiveness of category captains and collaboration in retail are not as high as theory or best practice would predict. Suppliers and retailers suspect each other of opportunistic behaviour detrimental to both. In a stylized dyadic supply chain model prior to the effective contracting of the category captain, we show why information asymmetry between both is preferred: the retailer will hint at or develop retaliatory power to keep the supplier in check whereas the supplier will try to extract a rent by taking advantage of available information about relationship specific investment. We model single-period interaction when the retailer has to invest in relationship specific assets and alternative category manager grooming. We provide normative and positive support both to the captain's potential opportunistic behaviour as well as the retailer's investment decision in alternative captains and monitoring ability. In a two-period extension, we show how the retailer can discipline the captain ex ante. The model and its results complement and extend research in pre-contractual category captainship and supplier-retailer collaboration and coordination. They represent a departure from the usual vision in which sharing information and collaborating generate higher supply chain rent.

Citation: Xavier Brusset, Per J. Agrell. Intrinsic impediments to category captainship collaboration. Journal of Industrial & Management Optimization, 2017, 13 (1) : 113-133. doi: 10.3934/jimo.2016007
References:
[1]

P. AghionM. Dewatripont and P. Rey, Renegotiation design with incomplete information, Econometrica, 62 (1994), 252-282. Google Scholar

[2]

S. Baiman and M. V. Rajan, The role of information and opportunism in the choice of buyer-supplier relationships, Journal of Accounting Research, 40 (2002), 2247-278. doi: 10.1111/1475-679X.00046. Google Scholar

[3]

S. BandyopadhyayA. Rominger and S. Basaviah, Developing a framework to improve retail category management through category captain arrangements, Journal of Retailing and Consumer Services, 16 (2009), 315-319. doi: 10.1016/j.jretconser.2008.12.001. Google Scholar

[4]

R. E. Barlow and F. Proschan, Mathematical theory of reliability, chapter 1, John Wiley & Sons, 1965, 9-18. Google Scholar

[5]

S. Borchert, Implementation hurdles of ECR partnerships-the German food sector as an ECR case study, International Journal of Retail and Distribution Management, 30 (2002), 354-360. doi: 10.1108/09590550210433338. Google Scholar

[6]

X. Brusset, Estimating the supply chain efficiency loss when the seller has to estimate the buyer's willingness to pay, RAIRO -Operations Research, 48 (2014), 477-496. doi: 10.1051/ro/2014018. Google Scholar

[7]

G. Cachon, Supply chain coordination with contracts, in Handbooks in Operations Research and Management Science: Supply Chain Management (eds. T. de Kok and S. Graves), 11, chapter 6, Elsevier, 2004,229-340. doi: 10.1016/S0927-0507(03)11006-7. Google Scholar

[8]

G. Cachon and M. Lariviere, Contracting to assure supply: how to share demand forecasts in a supply chain, Management Science, 47 (2001), 629-646. doi: 10.1287/mnsc.47.5.629.10486. Google Scholar

[9]

C. Camman and L. Livolsi, Le category management, un vecteur de transversalité?, Management & Avenir, 4 (2009), 146-162. doi: 10.3917/mav.024.0146. Google Scholar

[10]

L. S. Carameli, The anti-competitive effects and antitrust implications of Category Management and category captains of consumer products, Chicago-Kent Law Review, 79 (2013), 1313-1356. Google Scholar

[11]

F. Chen, Information sharing and supply chain coordination, in Handbooks in Operations Research and Management Science: Supply chain Management (eds. T. de Kok and S. Graves), vol. 11, Elsevier, 2004, chapter 7,341-421. doi: 10.1016/S0927-0507(03)11007-9. Google Scholar

[12]

T.-Y. Chung, Incomplete contracts, specific investments, and risk sharing, Review of Economic Studies, 58 (1991), 1031-1042. doi: 10.2307/2297950. Google Scholar

[13]

E. Colla, Le contre-pouvoir de la distribution: une synthèse des théories économiques, stratégiques et de marketing des canaux, 2007, http://iut.univ-avignon.fr/mini_site/group/223/COMINDUS/Colla.pdf.Google Scholar

[14]

D. Corsten and N. Kumar, Do suppliers benefit from collaborative relationships with large retailers? an empirical investigation of the efficient consumer response action, Journal of Marketing, 69 (2005), 80-94. doi: 10.1509/jmkg.69.3.80.66360. Google Scholar

[15]

D. M. DesrochersG. T. Gundach and A. A. Foer, Analysis of antitrust challenges to category captain arrangements, Journal of Public Policy and Marketing, 22 (2003), 201-215. doi: 10.1509/jppm.22.2.201.17635. Google Scholar

[16]

K. Dupre and T. W. Gruen, The use of category management practices to obtain a sustainable competitive advantage in the fast-moving consumer goods industry, Journal of Business & Industrial Maketing, 19 (2004), 444-459. doi: 10.1108/08858620410564391. Google Scholar

[17]

D. Fudenberg, D. K. Levine and J. Tirole, Game-Theoretic Models of Bargaining, chapter Infinite-horizon models of bargaining with one-sided incomplete information, Cambridge University Press, 1985.Google Scholar

[18]

D. Fudenberg and J. Tirole, Sequential bargaining with incomplete information, Review of Economic Studies, 50 (1983), 221-247. doi: 10.2307/2297414. Google Scholar

[19]

S. GanesanM. GeorgeS. JapR. W. Palmatier and B. Weitz, Supply chain management and retailer performance: emerging trends, issues, and implications for research and practice, Journal of Retailing, 1 (2009), 84-94. doi: 10.1016/j.jretai.2008.12.001. Google Scholar

[20]

R. S. Greenberger, UST must pay $1.05 billion to a big tobacco competitor, 2003.Google Scholar

[21]

T. Gruen and R. Shah, Determinants and outcomes of plan and objectivity and implementation in category management relationships, Journal of Retailing, 76 (2000), 483-510. doi: 10.1016/S0022-4359(00)00041-5. Google Scholar

[22]

M. Halac, Relational contracts and the value of relationships, American Economic Review, 102 (2012), 750-779. Google Scholar

[23]

Joint Industry Report on Efficient Consumer Response, Category Management Report: Enhancing Consumer Value in the Grocery Industry, Technical report, Category Management Subcommittee, ECR Best Practices Operating Committee and The Partnering Group Inc, 1995.Google Scholar

[24]

Kea & Partners, Le magasin bousculé, le magasin toujours star, Technical report, Kea & Partners, 2014. Available from: https://www.kea-partners.com/sites/default/files/keapartners/enquetekeamagasindemain.pdf.Google Scholar

[25]

B. Klein and J. D. Wright, Antitrust analysis of Category Management, The Supreme Court Economic Review, 17.Google Scholar

[26]

H. Kotzab, Improving supply chain performance by Efficient Customer Response: a critical comparison of existing ECR approaches, Journal of Business & Industrial Marketing, 14 (1999), 364-377. doi: 10.1108/08858629910290111. Google Scholar

[27]

S. Kurnia and R. B. Johnston, Adoption of efficient consumer response: key issues and challenges in Australia, Supply Chain Management: an International Journal, 8 (2003), 251-262. doi: 10.1108/13598540310484645. Google Scholar

[28]

M. KurtuluşA. Nakkas and S. Ülküs, The value of category captainship in the presence of manufacturer competition, Production and Operations Management, 23 (2014), 420-430. doi: 10.1111/poms.12062. Google Scholar

[29]

M. Kurtuluş and L. B. Toktay, Category captainship: who wins, who loses?, ECR Journal, 4 (2004), 27-33. doi: 10.2139/ssrn.934970. Google Scholar

[30]

M. Kurtuluş and L. B. Toktay, Category captainship: Outsourcing retail category management, Working Paper, 2007. Available from: http://ssrn.com/abstract=956577.Google Scholar

[31]

M. Kurtuluş and L. B. Toktay, Category captainship vs. retailer category management under limited retail shelf space, Production and Operations Management, 20 (2011), 47-56. doi: 10.1111/j.1937-5956.2010.01141.x. Google Scholar

[32]

M. Kurtulu¸s and L. B. Toktay, Retail Supply Chain Management, chapter 7-Category captainship practices in the retail industry, 2nd edition, International Series in Operations Research & Management Science, Springer, 2015,147-174.Google Scholar

[33]

M. KurtuluşS. ÜlküJ. P. Dotson and A. Nakkas, The impact of category captainship on the breadth and appeal of a retailer's assortment, Journal of Retailing, 90 (2014), 379-392. doi: 10.1016/j.jretai.2014.02.001. Google Scholar

[34]

T. B. Leary, A Second Look at Category Management, Technical report, Federal Trade Commission Report, 2003. Available from: http://www.ftc.gov (accessed March 3,2010).Google Scholar

[35]

I. Lianos, New kids on the block: Retailer-driven vertical practices and the new regulation of vertical restraints in EU competition law, CPI Antitrust Journal, 2 (2010). Google Scholar

[36]

A. Lindblom and R. Olkkonen, An analysis of suppliers' roles in category management collaboration, Journal of Retailing and Consumer Services, 15 (2008), 1-8. doi: 10.1016/j.jretconser.2007.01.002. Google Scholar

[37]

A. LindblomR. OlkkonenP. Ollila and S. Hyvönen, Suppliers' role in category management: A study of supplier-retailer relationbships in Finland and Sweden, Industrial Marketing Management, 38 (2009), 1006-1013. doi: 10.1016/j.indmarman.2008.05.004. Google Scholar

[38]

E. Maskin, Nash equilibrium and welfare optimality, The Review of Economic Studies, 66 (1999), 23-39. doi: 10.1111/1467-937X.00076. Google Scholar

[39]

E. Maskin and J. Moore, Implementation and renegotiation, The Review of Economic Studies, 66 (1999), 39-57. doi: 10.1111/1467-937X.00077. Google Scholar

[40]

R. Matthews, More promise than performance?, Progressive Grocer, (), 26-28. Google Scholar

[41]

N. A. MorganA. Kaleka and R. Gooner, Focal supplier opportunism in supermarket retailer category management, Journal of Operations Management, 25 (2007), 512-527. doi: 10.1016/j.jom.2006.05.006. Google Scholar

[42]

T. O'Toole and B. Donaldson, Relationship performance dimensions of buyer-supplier exchanges, European Journal of Purchasing & Supply Management, 8 (2002), 197-207. doi: 10.1016/S0969-7012(02)00008-4. Google Scholar

[43]

A. Rubinstein, Perfect equilibrium in a bargaining model, Econometrica, 54 (1982), 97-109. doi: 10.2307/1912531. Google Scholar

[44]

I. Segal and M. Whinston, Exclusive contracts and protection of investments, Rand Journal of Economics, 31 (2000), 603-633. Google Scholar

[45]

R. Selten, Reexamination of the perfectness concept for equilibrium points in extensive games, International Journal of Game Theory, 4 (1975), 25-55. doi: 10.1007/BF01766400. Google Scholar

[46]

R. L. Steiner, Category management - a pervasive new vertical/horizontal format, Antitrust Magazine. doi: 10.2139/ssrn.1805129. Google Scholar

[47]

U. SubramanianJ. S. RajuS. K. Dhar and U. Wang, Competitive consequences of using a category captain, Management Science, 56 (2010), 1739-1765. doi: 10.1287/mnsc.1100.1211. Google Scholar

[48]

J. Tirole, Cognition and incomplete contracts, American Economic Review, 99 (2009), 265-294. doi: 10.1257/aer.99.1.265. Google Scholar

[49]

M. Tosh, What's up with ECR?, Progressive Grocer, (), 8-12. Google Scholar

[50]

Y. Wang, J. S. Raju and S. K. Dhar, The Choice and Consequences of Using a Category Captain for Category Management, Office of Research, Singapore Management University, 2003.Google Scholar

show all references

References:
[1]

P. AghionM. Dewatripont and P. Rey, Renegotiation design with incomplete information, Econometrica, 62 (1994), 252-282. Google Scholar

[2]

S. Baiman and M. V. Rajan, The role of information and opportunism in the choice of buyer-supplier relationships, Journal of Accounting Research, 40 (2002), 2247-278. doi: 10.1111/1475-679X.00046. Google Scholar

[3]

S. BandyopadhyayA. Rominger and S. Basaviah, Developing a framework to improve retail category management through category captain arrangements, Journal of Retailing and Consumer Services, 16 (2009), 315-319. doi: 10.1016/j.jretconser.2008.12.001. Google Scholar

[4]

R. E. Barlow and F. Proschan, Mathematical theory of reliability, chapter 1, John Wiley & Sons, 1965, 9-18. Google Scholar

[5]

S. Borchert, Implementation hurdles of ECR partnerships-the German food sector as an ECR case study, International Journal of Retail and Distribution Management, 30 (2002), 354-360. doi: 10.1108/09590550210433338. Google Scholar

[6]

X. Brusset, Estimating the supply chain efficiency loss when the seller has to estimate the buyer's willingness to pay, RAIRO -Operations Research, 48 (2014), 477-496. doi: 10.1051/ro/2014018. Google Scholar

[7]

G. Cachon, Supply chain coordination with contracts, in Handbooks in Operations Research and Management Science: Supply Chain Management (eds. T. de Kok and S. Graves), 11, chapter 6, Elsevier, 2004,229-340. doi: 10.1016/S0927-0507(03)11006-7. Google Scholar

[8]

G. Cachon and M. Lariviere, Contracting to assure supply: how to share demand forecasts in a supply chain, Management Science, 47 (2001), 629-646. doi: 10.1287/mnsc.47.5.629.10486. Google Scholar

[9]

C. Camman and L. Livolsi, Le category management, un vecteur de transversalité?, Management & Avenir, 4 (2009), 146-162. doi: 10.3917/mav.024.0146. Google Scholar

[10]

L. S. Carameli, The anti-competitive effects and antitrust implications of Category Management and category captains of consumer products, Chicago-Kent Law Review, 79 (2013), 1313-1356. Google Scholar

[11]

F. Chen, Information sharing and supply chain coordination, in Handbooks in Operations Research and Management Science: Supply chain Management (eds. T. de Kok and S. Graves), vol. 11, Elsevier, 2004, chapter 7,341-421. doi: 10.1016/S0927-0507(03)11007-9. Google Scholar

[12]

T.-Y. Chung, Incomplete contracts, specific investments, and risk sharing, Review of Economic Studies, 58 (1991), 1031-1042. doi: 10.2307/2297950. Google Scholar

[13]

E. Colla, Le contre-pouvoir de la distribution: une synthèse des théories économiques, stratégiques et de marketing des canaux, 2007, http://iut.univ-avignon.fr/mini_site/group/223/COMINDUS/Colla.pdf.Google Scholar

[14]

D. Corsten and N. Kumar, Do suppliers benefit from collaborative relationships with large retailers? an empirical investigation of the efficient consumer response action, Journal of Marketing, 69 (2005), 80-94. doi: 10.1509/jmkg.69.3.80.66360. Google Scholar

[15]

D. M. DesrochersG. T. Gundach and A. A. Foer, Analysis of antitrust challenges to category captain arrangements, Journal of Public Policy and Marketing, 22 (2003), 201-215. doi: 10.1509/jppm.22.2.201.17635. Google Scholar

[16]

K. Dupre and T. W. Gruen, The use of category management practices to obtain a sustainable competitive advantage in the fast-moving consumer goods industry, Journal of Business & Industrial Maketing, 19 (2004), 444-459. doi: 10.1108/08858620410564391. Google Scholar

[17]

D. Fudenberg, D. K. Levine and J. Tirole, Game-Theoretic Models of Bargaining, chapter Infinite-horizon models of bargaining with one-sided incomplete information, Cambridge University Press, 1985.Google Scholar

[18]

D. Fudenberg and J. Tirole, Sequential bargaining with incomplete information, Review of Economic Studies, 50 (1983), 221-247. doi: 10.2307/2297414. Google Scholar

[19]

S. GanesanM. GeorgeS. JapR. W. Palmatier and B. Weitz, Supply chain management and retailer performance: emerging trends, issues, and implications for research and practice, Journal of Retailing, 1 (2009), 84-94. doi: 10.1016/j.jretai.2008.12.001. Google Scholar

[20]

R. S. Greenberger, UST must pay $1.05 billion to a big tobacco competitor, 2003.Google Scholar

[21]

T. Gruen and R. Shah, Determinants and outcomes of plan and objectivity and implementation in category management relationships, Journal of Retailing, 76 (2000), 483-510. doi: 10.1016/S0022-4359(00)00041-5. Google Scholar

[22]

M. Halac, Relational contracts and the value of relationships, American Economic Review, 102 (2012), 750-779. Google Scholar

[23]

Joint Industry Report on Efficient Consumer Response, Category Management Report: Enhancing Consumer Value in the Grocery Industry, Technical report, Category Management Subcommittee, ECR Best Practices Operating Committee and The Partnering Group Inc, 1995.Google Scholar

[24]

Kea & Partners, Le magasin bousculé, le magasin toujours star, Technical report, Kea & Partners, 2014. Available from: https://www.kea-partners.com/sites/default/files/keapartners/enquetekeamagasindemain.pdf.Google Scholar

[25]

B. Klein and J. D. Wright, Antitrust analysis of Category Management, The Supreme Court Economic Review, 17.Google Scholar

[26]

H. Kotzab, Improving supply chain performance by Efficient Customer Response: a critical comparison of existing ECR approaches, Journal of Business & Industrial Marketing, 14 (1999), 364-377. doi: 10.1108/08858629910290111. Google Scholar

[27]

S. Kurnia and R. B. Johnston, Adoption of efficient consumer response: key issues and challenges in Australia, Supply Chain Management: an International Journal, 8 (2003), 251-262. doi: 10.1108/13598540310484645. Google Scholar

[28]

M. KurtuluşA. Nakkas and S. Ülküs, The value of category captainship in the presence of manufacturer competition, Production and Operations Management, 23 (2014), 420-430. doi: 10.1111/poms.12062. Google Scholar

[29]

M. Kurtuluş and L. B. Toktay, Category captainship: who wins, who loses?, ECR Journal, 4 (2004), 27-33. doi: 10.2139/ssrn.934970. Google Scholar

[30]

M. Kurtuluş and L. B. Toktay, Category captainship: Outsourcing retail category management, Working Paper, 2007. Available from: http://ssrn.com/abstract=956577.Google Scholar

[31]

M. Kurtuluş and L. B. Toktay, Category captainship vs. retailer category management under limited retail shelf space, Production and Operations Management, 20 (2011), 47-56. doi: 10.1111/j.1937-5956.2010.01141.x. Google Scholar

[32]

M. Kurtulu¸s and L. B. Toktay, Retail Supply Chain Management, chapter 7-Category captainship practices in the retail industry, 2nd edition, International Series in Operations Research & Management Science, Springer, 2015,147-174.Google Scholar

[33]

M. KurtuluşS. ÜlküJ. P. Dotson and A. Nakkas, The impact of category captainship on the breadth and appeal of a retailer's assortment, Journal of Retailing, 90 (2014), 379-392. doi: 10.1016/j.jretai.2014.02.001. Google Scholar

[34]

T. B. Leary, A Second Look at Category Management, Technical report, Federal Trade Commission Report, 2003. Available from: http://www.ftc.gov (accessed March 3,2010).Google Scholar

[35]

I. Lianos, New kids on the block: Retailer-driven vertical practices and the new regulation of vertical restraints in EU competition law, CPI Antitrust Journal, 2 (2010). Google Scholar

[36]

A. Lindblom and R. Olkkonen, An analysis of suppliers' roles in category management collaboration, Journal of Retailing and Consumer Services, 15 (2008), 1-8. doi: 10.1016/j.jretconser.2007.01.002. Google Scholar

[37]

A. LindblomR. OlkkonenP. Ollila and S. Hyvönen, Suppliers' role in category management: A study of supplier-retailer relationbships in Finland and Sweden, Industrial Marketing Management, 38 (2009), 1006-1013. doi: 10.1016/j.indmarman.2008.05.004. Google Scholar

[38]

E. Maskin, Nash equilibrium and welfare optimality, The Review of Economic Studies, 66 (1999), 23-39. doi: 10.1111/1467-937X.00076. Google Scholar

[39]

E. Maskin and J. Moore, Implementation and renegotiation, The Review of Economic Studies, 66 (1999), 39-57. doi: 10.1111/1467-937X.00077. Google Scholar

[40]

R. Matthews, More promise than performance?, Progressive Grocer, (), 26-28. Google Scholar

[41]

N. A. MorganA. Kaleka and R. Gooner, Focal supplier opportunism in supermarket retailer category management, Journal of Operations Management, 25 (2007), 512-527. doi: 10.1016/j.jom.2006.05.006. Google Scholar

[42]

T. O'Toole and B. Donaldson, Relationship performance dimensions of buyer-supplier exchanges, European Journal of Purchasing & Supply Management, 8 (2002), 197-207. doi: 10.1016/S0969-7012(02)00008-4. Google Scholar

[43]

A. Rubinstein, Perfect equilibrium in a bargaining model, Econometrica, 54 (1982), 97-109. doi: 10.2307/1912531. Google Scholar

[44]

I. Segal and M. Whinston, Exclusive contracts and protection of investments, Rand Journal of Economics, 31 (2000), 603-633. Google Scholar

[45]

R. Selten, Reexamination of the perfectness concept for equilibrium points in extensive games, International Journal of Game Theory, 4 (1975), 25-55. doi: 10.1007/BF01766400. Google Scholar

[46]

R. L. Steiner, Category management - a pervasive new vertical/horizontal format, Antitrust Magazine. doi: 10.2139/ssrn.1805129. Google Scholar

[47]

U. SubramanianJ. S. RajuS. K. Dhar and U. Wang, Competitive consequences of using a category captain, Management Science, 56 (2010), 1739-1765. doi: 10.1287/mnsc.1100.1211. Google Scholar

[48]

J. Tirole, Cognition and incomplete contracts, American Economic Review, 99 (2009), 265-294. doi: 10.1257/aer.99.1.265. Google Scholar

[49]

M. Tosh, What's up with ECR?, Progressive Grocer, (), 8-12. Google Scholar

[50]

Y. Wang, J. S. Raju and S. K. Dhar, The Choice and Consequences of Using a Category Captain for Category Management, Office of Research, Singapore Management University, 2003.Google Scholar

Figure 1.  Timeline of events when retailer and supplier agree on a contract for category captain. If the supplier refuses, the timeline is stopped on this disagreement (not represented here).
Figure 2.  Evolution of $w_3=Z^*$ (blue) and of $\Pi_s$ (red, down-sloping) when the mean of the distribution $Z$ $\mu$ increases from 0.1 to 2 and $\sigma=0.15$. The supplier rejects the offer and turns to her second-best option when $\mu>1.25$.
Figure 3.  Evolution of $Z^*$ when the standard deviation of the distribution of the belief about the retailer's $z$ increases from 0 to 1.5 and $\mu=0.5$.
Figure 4.  Representation of the evolution of the supplier's expected information rent $V$ when $\sigma$ evolves from 0 to 1.5 but $\mu=0.5$.
Figure 5.  Representation of the evolution of the supplier's expected information rent $V$ when $\mu$ evolves between 0 and 2 for $\sigma=0.2$ and $\sigma=0.5$.
Table 1.  Table of notations
TypeNotationDefinition
Retailerαadditional investment for monitoring purposes
R1revenue from the category managed by the supplier
R2revenue from the category managed by alternative
w1fee received under full information
w2fee received under complete uncertainty
w3fee received under asymmetric information
Πr(.)retailer's profit function
Supplier Πs(.)supplier's profit function
S1, S2net revenues from accepted contract or not
δs binary decision variable, 1 when
agreeing with the retailer
zvalue of $S_1 - S_2$
$f_Z(.), \! F_Z(.)$pdf and cdf of belief about $z$,
with $\mu$ as mean and $\sigma$ as standard deviation
Vrent retained by the supplier from interaction
μrmean of the supplier's belief of
the retailer's distribution of $z$
TypeNotationDefinition
Retailerαadditional investment for monitoring purposes
R1revenue from the category managed by the supplier
R2revenue from the category managed by alternative
w1fee received under full information
w2fee received under complete uncertainty
w3fee received under asymmetric information
Πr(.)retailer's profit function
Supplier Πs(.)supplier's profit function
S1, S2net revenues from accepted contract or not
δs binary decision variable, 1 when
agreeing with the retailer
zvalue of $S_1 - S_2$
$f_Z(.), \! F_Z(.)$pdf and cdf of belief about $z$,
with $\mu$ as mean and $\sigma$ as standard deviation
Vrent retained by the supplier from interaction
μrmean of the supplier's belief of
the retailer's distribution of $z$
Table 2.  Profits from the different information scenarios in the numerical illustration.
ScenarioRetailerSupplier
minmaxminmax
Full information3.51
Complete ignorance22.5
Asymmetric information122.53.5
ScenarioRetailerSupplier
minmaxminmax
Full information3.51
Complete ignorance22.5
Asymmetric information122.53.5
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