Optimal contract under brand name collaboration

Abstract

In an international Cournot duopoly, we determine the optimal contract for a brand name collaboration where the contract consists of …xed-fee and output royalty. We show that the …rms always have the incentive for brand name collaboration. However, whether the optimal contract will have positive …xed-fee and positive royalty is not immediate and it depends on the factors such as the transportation cost of exporting and the consumers'initial perception about the products of the …rms re ‡ected in the consumers'maximum willingness to pay for the products. Thus, our paper shows that the possibility of brand name collaboration is signi…cantly more than predicted in the existing literature.

Interorganizational Relationships in Marketing: A Critical Review and Research Agenda

“…They are intended as the formal and implicit relational characteristics that exist between the exchange parties (Young et al . ), which range from contractual agreements to equity relations in which a shareholding relationship is involved (Basak and Mukherjee ; Li et al . ; Reid et al .…”

“…When collaborating in a structured manner, governance mechanisms assume higher relevance. They are intended as the formal and implicit relational characteristics that exist between the exchange parties (Young et al 1996), which range from contractual agreements to equity relations in which a shareholding relationship is involved (Basak and Mukherjee 2014;Li et al 2010;Reid et al 2008). They are fundamental in order to design the IOR configuration (Chen and Chiang 2011;Wang and Fesenmaier 2007) and establish rules for power and control (Luo et al 2011).…”