Abstract
Demand uncertainty has always been an important feature of business environments. Shorter product cycles and the volatility of the global marketplace increase demand uncertainty for any given product. In the clothing industry, for example, the cost of demand uncertainty was estimated at $25 billion per year.143 General Motors loses upwards of 20% of potential sales because the desired vehicle is not available within the customers’ wait tolerance.144
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References
See Frazier, (1986), cited in Anand / Mendelson (1996).
See Gonsalves (1994), cited in Anand / Mendelson (1996).
Milgrom / Roberts (1992), p. 17, name the delegation of authority to those who posess information of one of the essential features of a succesful organization.
See examples in chapter 2.
See Li (1985).
One could also imagine a situation where managers are hired to learn about markets and to execute decisions on behalf of the owner after having transmitted their market specific knowledge. However, as there is assumed to be no conflict between owners and managers, the results of this structure would be the same as a structure where managers share information and are evaluated on the basis of corporate profits.
As before, non-monetary interests are neglected. The objective of the manager is therefore determined by the salary proposed by central headquarters.
The first case coincides with a game without delegation — with the only difference that each manager is informed about his own market. As firms strictly prefer being informed about market parameters of the market in which decisions are to be taken, the question of wether or not firms are delegating at all will not be adressed in this context.
See Appendix D.1 for restrictions on g.
See Appendix D.2 for a proof of this assumption.
See Horngren / Foster (1991), pp. 219 ff. for standard costs and the use of expectations to determine them.
It will be assumed that both firms’ owners apply the same incentive scheme.
Proof see Appendix D.3.
For value and proof of equilibrium quantities see Appendix D.4.
See Appendix D.5.
See Albach / Jin / Schenk (1996) for an overview.
See Caballero Sanz (1996).
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© 2001 Deutscher Universitäts-Verlag GmbH, Wiesbaden
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Neubauer, S. (2001). Interdivisional information sharing and multimarket contact. In: Multimarket Contact and Organizational Design. Beiträge zur betriebswirtschaftlichen Forschung, vol 97. Deutscher Universitätsverlag, Wiesbaden. https://doi.org/10.1007/978-3-663-05979-0_6
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DOI: https://doi.org/10.1007/978-3-663-05979-0_6
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