Implementable Mechanisms to Coordinate Horizontal Alliances

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dc.contributor.authorNault, Barrie R
dc.contributor.authorTyagi, Rajeev K.
dc.date.accessioned2015-05-25T22:16:49Z
dc.date.available2015-05-25T22:16:49Z
dc.date.issued2001-06
dc.description*INFORMS: unless published under the open access option, the publisher will provide a specific copy of the paper that can be posted to a web page https://www.informs.org/Find-Research-Publications/INFORMS-Journals/Rights-Permissions#work. Publisher provided copy as per publisher's policy. 05/22/2015en_US
dc.description.abstractUnprecedented changes in the economics of interaction, mainlyas a result of advances in information and telecommunication technologies such as the Internet, are causing a shift toward more networked forms of organizations such as horizontal alliances—that is, alliances among firms in similar businesses that have positive externalities between them. Because the success of such horizontal alliances depends cruciallyon aligning individual alliance member incentives with those of the alliance as a whole, it is important to find coordination mechanisms that achieve this alignment and are simple-to-implement. In this paper, we examine two simple coordination mechanisms for a horizontal alliance characterized by the following features: (i) firms in the alliance can exert effort onlyin their “local” markets to increase customer demand for the alliance; (ii) customers are mobile and a customer living in a given alliance member’s local area mayhave a need to buyfr om some other alliance member; and (iii) the coordination rules followed bythe alliance determine which firms from a large pool of potential member-firms join the alliance, and how much effort each firm joining the alliance exerts in its local market. In this horizontal alliance setup, we consider the use of two coordination mechanisms: (i) a linear transfer of fees between members if demand from one member’s local customer is served byanother member, and (ii) ownership of an equal share of the alliance profits generated from a royalty on each member’s sales. We derive conditions on the distribution of demand externalities among alliance members to determine when each coordination mechanism should be used separately, and when the mechanisms should be used together.en_US
dc.identifier.citationNault, B.R., and R.K. Tyagi, "Implementable Mechanisms to Coordinate Horizontal Alliances," Management Science, 47, 6 (June 2001), 787-799en_US
dc.identifier.doihttp://dx.doi.org/10.11575/PRISM/28800
dc.identifier.issn1526-5501
dc.identifier.urihttp://hdl.handle.net/1880/50442
dc.language.isoenen_US
dc.publisherINFORMSen_US
dc.publisher.corporateUniversity of Calgaryen_US
dc.publisher.departmentManagement Information Systemsen_US
dc.publisher.facultyHaskayne School of Businessen_US
dc.publisher.institutionUniversity of Calgaryen_US
dc.subjectEconomics of Interactionen_US
dc.subjectHorizontal Alliancesen_US
dc.subjectExternalitiesen_US
dc.subjectIncentive Mechanismsen_US
dc.titleImplementable Mechanisms to Coordinate Horizontal Alliancesen_US
dc.typejournal article
thesis.degree.disciplineManagement Information Systemsen_US
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