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- Game theory (6)
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Articles 1 - 30 of 36
Full-Text Articles in Management Information Systems
Interaction Between Manufacturer's Wholesale Pricing And Retailers’ Price-Matching Guarantees, Arcan Nalca, Gangshu (George) Cai
Interaction Between Manufacturer's Wholesale Pricing And Retailers’ Price-Matching Guarantees, Arcan Nalca, Gangshu (George) Cai
Information Systems and Analytics
In practice, many retailers employ price-matching guarantees (PMGs), committing to meet the price of an identical product at a competitor's outlet. Despite the profound linkage between retailers and manufacturers, existing literature has predominantly explored retailers' PMGs without contemplating the influence of manufacturers' wholesale pricing strategies. Employing a supply chain model comprising one manufacturer and two retailers, we scrutinize the implications of wholesale pricing—uniform or discriminatory—on supply chain members and consumers when retailers have the option to extend PMGs. Our analysis uncovers that retailers refrain from offering PMGs when the manufacturer is granted the discretion to set discriminatory wholesale prices—even if …
Partial Centralization In A Durable-Good Supply Chain, Jin Li, Xiaodong Yang, Victor Shi, Gangshu (George) Cai
Partial Centralization In A Durable-Good Supply Chain, Jin Li, Xiaodong Yang, Victor Shi, Gangshu (George) Cai
Information Systems and Analytics
There has been extensive research on the strategic choice between supply chain centralization and decentralization. However, most research assumes complete centralization or complete decentralization but omits the commonly adopted supply chain structure of partial centralization. With partial centralization, a firm owns a portion, but not all, of its partner. To help fill this research gap, in this paper, we make a major contribution by explicitly analyzing partial centralization in a supply chain where a durable-good manufacturer owns a portion of its downstream retailer. We start with a two-period model and derive analytical equilibrium outcomes of the supply chain and its …
Cascade Degradation And Upcycling Of Polystyrene Waste To High-Value Chemicals, Zhen Xu, Fuping Pan, Mengqi Sun, Jianjun Xu, Nuwayo Eric Munyaneza, Zacary L. Croft, Gangshu (George) Cai, Guoliang Liu
Cascade Degradation And Upcycling Of Polystyrene Waste To High-Value Chemicals, Zhen Xu, Fuping Pan, Mengqi Sun, Jianjun Xu, Nuwayo Eric Munyaneza, Zacary L. Croft, Gangshu (George) Cai, Guoliang Liu
Information Systems and Analytics
Plastic waste represents one of the most urgent environmental challenges facing humankind. Upcycling has been proposed to solve the low profitability and high market sensitivity of known recycling methods. Existing upcycling methods operate under energy-intense conditions and use precious-metal catalysts, but produce low-value oligomers, monomers, and common aromatics. Herein, we report a tandem degradation-upcycling strategy to exploit high-value chemicals from polystyrene (PS) waste with high selectivity. We first degrade PS waste to aromatics using ultraviolet (UV) light and then valorize the intermediate to diphenylmethane. Low-cost AlCl3 catalyzes both the reactions of degradation and upcycling at ambient temperatures under atmospheric pressure. …
The Role Of Expectation–Reality Discrepancy In Service Contracts, Xuying Zhao, Hong Guo, Gangshu (George) Cai
The Role Of Expectation–Reality Discrepancy In Service Contracts, Xuying Zhao, Hong Guo, Gangshu (George) Cai
Information Systems and Analytics
Service contracts are common practice in some industries while being eliminated in others. To investigate this phenomenon, we identify expectation–reality discrepancy (ERD) as a key determinant. A provider's ERD is defined as consumers’ ex-ante expected valuation minus their ex-post realized valuation of the provider's service. Our analysis reveals that providers’ contract strategies critically depend on their ERDs rather than the true service valuations. A provider with a higher ERD is more likely to enforce contracts, regardless of whether the true service valuation is higher than that of the competitor. Providers should enforce contracts only when they have positive ERDs. Furthermore, …
Buyer Financing In Pull Supply Chains: Zero-Interest Early Payment Or In-House Factoring?, Xiangfeng Chen, Qihui Lu, Gangshu (George) Cai
Buyer Financing In Pull Supply Chains: Zero-Interest Early Payment Or In-House Factoring?, Xiangfeng Chen, Qihui Lu, Gangshu (George) Cai
Information Systems and Analytics
This study investigates the efficacy of zero-interest early payment financing (alternatively referred to as early payment) and positive-interest in-house factoring financing in a pull supply chain with a capital-constrained manufacturer selling a product through a capital-abundant retailer. Early payment is the prepayment of a wholesale cost to the manufacturer, whereas in-house factoring is a loan service provided to the manufacturer by a branch financing firm of the same retailer. We find that the retailer prefers early payment financing to bank financing when the manufacturer’s production cost is low. If the retailer instead offers positive-interest in-house factoring financing to the manufacturer, …
Manufacturer Strategy On Service Provision In Competitive Channels, Xiaodong Yang, Gangshu (George) Cai, Charles A. Ingene, Jihong Zhang
Manufacturer Strategy On Service Provision In Competitive Channels, Xiaodong Yang, Gangshu (George) Cai, Charles A. Ingene, Jihong Zhang
Information Systems and Analytics
A manufacturer commonly distributes through a set of retailers who are authorized to sell its product; demand-enhancing services may also be provided by the manufacturer. These services may be granted to all authorized retailers (uniform service provision) or to a favored few authorized retailers (differential service provision). To determine when a manufacturer does—or does not—bestow equal service levels, we develop a model of one manufacturer selling through two competing retailers. We find manufacturer optimality to entail uniform service at some parametric values, while differential service is optimal at other values. Counterintuitively, with differential service, the recipient of lower service may …
Optimal Policy For Production Systems With Two Flexible Resources And Twoproducts, Jianjun Xu, Shaoxiang Chen, Gangshu (George) Cai
Optimal Policy For Production Systems With Two Flexible Resources And Twoproducts, Jianjun Xu, Shaoxiang Chen, Gangshu (George) Cai
Information Systems and Analytics
Manufacturing companies are facing increasing volatility in demand. As a result, there has been an emerging need for a flexible multi-period manufacturing system that uses multiple resources to produce multiple products with stochastic demands. To manage such multi-product, multi-resource systems, manufacturers need to make two decisions simultaneously: setting a production quantity for each product and allocating the limited resources dynamically among the products. Unfortunately, although the flexibility design and investment have been extensively studied, the literature has been muted on how to make production and allocation decisions optimally from an operational perspective. This article attempts to fill this literature gap …
Impact Of In-Store Promotion And Spillover Effect Onprivate Label Introduction, Yingjue Zhou, Tieming Liu, Gangshu (George) Cai
Impact Of In-Store Promotion And Spillover Effect Onprivate Label Introduction, Yingjue Zhou, Tieming Liu, Gangshu (George) Cai
Information Systems and Analytics
This paper investigates the impact of in-store promotion and its spillover effect on private label introductions. We study different retail supply chain scenarios where the retailer carrying a national brand may introduce its own private label product and promote either the national brand or the private label inside the store. The in-store promotion on one product has a positive spillover effect on the other product. Without in-store promotion and spillover effect, the conventional wisdom indicates that, in a retail supply chain, the national brand manufacturer will be negatively impacted by the introduction of a private label product. With in-store promotion …
The Effects Of Herding And Word Of Mouth In A Two-Period Advertising Signaling Model, Xueping Zhen, Gangshu (George) Cai, Reo Song, Sungha Jang
The Effects Of Herding And Word Of Mouth In A Two-Period Advertising Signaling Model, Xueping Zhen, Gangshu (George) Cai, Reo Song, Sungha Jang
Information Systems and Analytics
In the context of increasing globalization, a new product may be sequentially released into markets in different countries and regions. The behavior of consumers in the market where a new product is first launched may have a huge impact on the purchasing behavior of consumers in later markets through the effects of herding and word of mouth (WOM). We suggest that these effects may significantly influence advertising when new products with short life cycles, such as movies, books, games, and music, are sequentially launched and not repeatedly purchased by consumers. Using a two-period advertising signaling model, this study theoretically demonstrates …
The Cash Flow Advantages Of 3pls As Supply Chain Orchestrators, Xiangfeng Chen, Gangshu (George) Cai, Jing-Sheng Song
The Cash Flow Advantages Of 3pls As Supply Chain Orchestrators, Xiangfeng Chen, Gangshu (George) Cai, Jing-Sheng Song
Information Systems and Analytics
With an increasingly open global economy and advanced technologies, some third-party logistics providers (3PLs), such as Eternal Asia, have emerged as supply chain orchestrators, linking buyers with manufacturers worldwide. In addition to their traditional transportation services, these orchestrators provide procurement and financial assistance to buyers in the supply network, especially small- and medium-sized enterprises (SMEs) in developing countries. Oftentimes, the 3PLs can obtain payment delay arrangements from the financially stronger manufacturers, which in turn can be partially extended to the SME buyers, alleviating their high costs of capital. To illustrate the efficiency improvements of the aforementioned practice, we use a …
Financing Multiple Heterogeneous Suppliers In Assembly Systems: Buyer Finance Vs. Finance, Shiming Deng, Chaocheng Gu, Gangshu (George) Cai
Financing Multiple Heterogeneous Suppliers In Assembly Systems: Buyer Finance Vs. Finance, Shiming Deng, Chaocheng Gu, Gangshu (George) Cai
Information Systems and Analytics
Buyer finance has been practiced by manufacturers/assemblers for years; however, few papers have investigated the efficacy of buyer finance in an assembly system with multiple suppliers. This paper fills the literature gap by comparing buyer finance with bank finance in a supply chain with one assembler and multiple heterogeneous capital-constrained component suppliers. We characterize the equilibrium solutions for different financing schemes (i.e., buyer finance, bank finance, and no finance). We show that in buyer finance the assembler should charge the suppliers the lowest possible interest rate, which may be even below its own unit capital opportunity cost, leading to interest …
Competitive Retailer Strategies For New Market Research, Entry And Positioning Decisions, Xiaodong Yang, Gangshu (George) Cai, Ying-Ju Chen, Shu-Jung Sunny Yange
Competitive Retailer Strategies For New Market Research, Entry And Positioning Decisions, Xiaodong Yang, Gangshu (George) Cai, Ying-Ju Chen, Shu-Jung Sunny Yange
Information Systems and Analytics
This paper investigates strategies for new market research and positioning of stores or products by competing retailers in a duopoly setting. We examine the scenario where the two retailers are considering entry into an uncertain new market that is an extension of their existing markets. The retailers must make decisions on whether or not to first conduct research about the new market's location relative to their existing markets and its size before deciding on their own positioning in it. We first study a sequential-move leader–follower setup to highlight the choice of an “innovate-or-imitate” strategy. We find when the potential new …
Procurement With Reverse Auction And Flexible Noncompetitive Contracts, Sean X. Zhou, Zhijie Tao, Nianbing Zhang, Gangshu (George) Cai
Procurement With Reverse Auction And Flexible Noncompetitive Contracts, Sean X. Zhou, Zhijie Tao, Nianbing Zhang, Gangshu (George) Cai
Information Systems and Analytics
This article investigates a hybrid procurement mechanism that combines a reverse auction with flexible noncompetitive contracts. A buyer adopts such mechanism to procure multiple units of a product from a group of potential suppliers. Specifically, the buyer first offers contracts to some suppliers who, if accepting the contract, do not participate in the auction while committing to selling a unit to the buyer at the price of the subsequent auction. For the suppliers rejecting the offers, they can join the subsequent auction with the other suppliers to compete on the remaining units. When the buyer offers only one flexible noncompetitive …
A Response To “Transaction Cost Economics On Trial Again”, Michael Schermann, Philip Yetton, Helmut Krcmar
A Response To “Transaction Cost Economics On Trial Again”, Michael Schermann, Philip Yetton, Helmut Krcmar
Information Systems and Analytics
We appreciate the careful and thoughtful commentary on Schermann et al. (2016) by Lacity and Khan (2016). Their commentary caused us to reflect on some of the underlying assumptions guiding our research. In the spirit of Lacity and Khan (2016), we do not attempt to defend our research and ‘win’ the conversation. Instead, we build on their insights to contribute to this potentially fruitful conversation among IS scholars started by Lacity and Khan (2016). We are grateful for the invitation from the Journal of Strategic Information Systems (JSIS) to do this.
The Role Of Transaction Cost Economics In Information Technology Outsourcing Research: A Meta-Analysis Of The Choice Of Contract Type, Michael Schermann, Konrad Dongus, Philip Yetton, Helmut Krcmar
The Role Of Transaction Cost Economics In Information Technology Outsourcing Research: A Meta-Analysis Of The Choice Of Contract Type, Michael Schermann, Konrad Dongus, Philip Yetton, Helmut Krcmar
Information Systems and Analytics
Two recent reviews report that the empirical findings in information technology outsourcing (ITO) research are frequently inconsistent with the prevailing dominant analytical framework of transaction cost economics (TCE). While employing similar methodologies, the two reviews propose different strategies to resolve the inconsistencies. One is to improve the methodological rigor, specifically, the operationalization of TCE constructs. The other is to abandon TCE in favor of a new analytical framework. This paper presents a meta-analysis of the empirical findings on the choice of contract type as a function of task uncertainty. The results support both strategies. Refining the operationalization of TCE constructs, …
Toward An Ontology Of Workarounds: A Literature Review On Existing Concepts, Nina Röder, Manuel Wiesche, Michael Schermann, Helmut Krcmar
Toward An Ontology Of Workarounds: A Literature Review On Existing Concepts, Nina Röder, Manuel Wiesche, Michael Schermann, Helmut Krcmar
Information Systems and Analytics
While workarounds are studied frequently in information systems research, a coherent and interrelated structure to organize the knowledge of the field is still missing. In this study, we provide a first step towards an ontology of workarounds in order to enable researchers to study the relationships among the core concepts. By identifying existing literature, we discover three gaps in workaround research: (1) lack of conceptual consensus, (2) fragmentation and (3) static perspective. To advance theory, we provide an overview of different types of workarounds that are frequently used in literature. Based on these findings we derive core concepts of workarounds …
Does Advertising Indicate Product Quality? Evidence From Prelaunch And Postlaunch Advertising In The Movie Industry, Reo Song, Sungha Jang, Gangshu (George) Cai
Does Advertising Indicate Product Quality? Evidence From Prelaunch And Postlaunch Advertising In The Movie Industry, Reo Song, Sungha Jang, Gangshu (George) Cai
Information Systems and Analytics
Literature on the informative role of advertising indicates that advertising quantity can serve as an indicator of product quality. As product life cycles grow shorter, firms in many industries spend significant amounts on advertising during the prelaunch period to create large initial demand. Thus, the role of prelaunch advertising may differ from that of postlaunch advertising, and a proper understanding of these differences is important. This study provides an empirical investigation of whether advertising is a reliable indicator of quality before and after product launches, using the data from the movie industry. Analyses of 1078 movies released during 2003–2011 show …
Using The Default Option Bias To Influence Decision-Making While Driving, Klaus Goffart, Michael Schermann, Christopher Kohl, Jörg Preißinger, Helmut Krcmar
Using The Default Option Bias To Influence Decision-Making While Driving, Klaus Goffart, Michael Schermann, Christopher Kohl, Jörg Preißinger, Helmut Krcmar
Information Systems and Analytics
Gaining a better understanding of human–computer interaction in multiple-goal environments, such as driving, is critical as people increasingly use information technology to accomplish multiple tasks simultaneously. Extensive research shows that decision biases can be utilized as effective cues to guide user interaction in single-goal environments. This article is a first step toward understanding the effect of decision biases in multiple-goal environments. This study analyzed data from a field experiment during which a comparison was made between drivers’ decisions on parking lots in a single-goal environment and drivers’ decisions in a multiple-goal environment when being exposed to the default option bias. …
Determinants Of Vendor Profitability In Two Contractual Regimes: An Empirical Analysis Of Enterprise Resource Planning Projects, Stefan Hoermann, Tobias Hlavka, Michael Schermann, Helmut Krcmar
Determinants Of Vendor Profitability In Two Contractual Regimes: An Empirical Analysis Of Enterprise Resource Planning Projects, Stefan Hoermann, Tobias Hlavka, Michael Schermann, Helmut Krcmar
Information Systems and Analytics
In this paper, we investigate the effects of four determinants of vendor profitability in enterprise resource planning (ERP) outsourcing projects under two contractual regimes: fixed price (FP) contracts and time and material (TM) contracts. We hypothesize that effect sizes are larger under FP contracts than under TM contracts. From a transaction cost economics perspective, we hypothesize that project uncertainty and project size are negatively associated with vendor profitability. From a knowledge-based view of the firm perspective, we hypothesize that industry knowledge and client knowledge are positively associated with vendor profitability. We tested these hypotheses on a comprehensive archival data set …
Online Manufacturer Referral To Heterogeneous Retailers, Hao Wu, Gangshu (George) Cai, Jian Chen, Chwen Sheu
Online Manufacturer Referral To Heterogeneous Retailers, Hao Wu, Gangshu (George) Cai, Jian Chen, Chwen Sheu
Information Systems and Analytics
Since the development of the Internet, thousands of manufacturers have been referring consumers visiting their websites to some or all of their retailers. Through a model with one manufacturer and two heterogeneous retailers, we investigate whether it is an equilibrium for the manufacturer to refer consumers exclusively to a retailer or nonexclusively to both retailers. Our analysis indicates that nonexclusive referral is the manufacturer's equilibrium choice if the referral segment market size is sufficiently large; otherwise, exclusive referral is the equilibrium choice. In exclusive referral, the manufacturer would refer consumers to the more cost-efficient and smaller retailer. In the presence …
Advertising In Asymmetric Competing Supply Chains, Bin Liu, Gangshu (George) Cai, Andy A. Tsay
Advertising In Asymmetric Competing Supply Chains, Bin Liu, Gangshu (George) Cai, Andy A. Tsay
Information Systems and Analytics
Advertising is a crucial tool for demand creation and market expansion. When a manufacturer uses a retailer as a channel for reaching end customers, the advertising strategy takes on an additional dimension: which party will perform the advertising to end customers. Cost sharing (“co-operative advertising”) arrangements proliferate the option by decoupling the execution of the advertising from its funding. We examine the efficacy of cost sharing in a model of two competing manufacturer–retailer supply chains who sell partially substitutable products that may differ in market size. Some counterintuitive findings suggest that the firms performing the advertising would rather bear the …
Risk Profiles In Individual Software Development And Packaged Software Implementation Projects: A Delphi Study At A German-Based Financial Services Company, Stefan Hoermann, Michael Schermann, Marco Aust, Helmut Krcmar
Risk Profiles In Individual Software Development And Packaged Software Implementation Projects: A Delphi Study At A German-Based Financial Services Company, Stefan Hoermann, Michael Schermann, Marco Aust, Helmut Krcmar
Information Systems and Analytics
The aim of this paper is to compare risk profiles of individual software development (ISD) and packaged software implementation (PSI) projects. While researchers have investigated risks in either PSI projects or ISD projects, an integrated perspective on how the risk profiles of these two types of information system (IS) projects differ is missing. To explore these differences, this work conducted a Delphi study at a German-based financial services company. The results suggest that: First, ISD projects seem to be more heterogeneous and face a larger variety of risks than the more straightforward PSI projects. Second, ISD projects seem to be …
The Roles Of Bank And Trade Credits: Theoretical Analysis And Empirical Evidence, Gangshu (George) Cai, Xiangfeng Chen, Zhiguo Xiao
The Roles Of Bank And Trade Credits: Theoretical Analysis And Empirical Evidence, Gangshu (George) Cai, Xiangfeng Chen, Zhiguo Xiao
Information Systems and Analytics
This study investigates the roles of bank and trade credits in a supply chain with a capital-constrained retailer facing demand uncertainty. We evaluate the retailer's optimal order quantity and the creditors' optimal credit limits and interest rates in two scenarios. In the single-credit scenario, we find the retailer prefers trade credit, if the trade credit market is more competitive than the bank credit market; otherwise, the retailer's preference of a specific credit type depends on the risk levels that the retailer would divert trade credit and bank credit to other risky investments. In the dual-credit scenario, if the bank credit …
Distributed Development And Product Line Decisions, Ram Bala, V. Krishnan, Wenge Zhu
Distributed Development And Product Line Decisions, Ram Bala, V. Krishnan, Wenge Zhu
Information Systems and Analytics
Distributed product development is becoming increasingly prevalent in a number of industries. We study how the global distribution of product development impacts the profit-maximizing product line that a firm offers. Specifically, we formulate a model to understand the linkage between cost arbitrage as a driver of distributed development and consequent market implications such as customer perceived quality loss to remotely developed products. Analysis of the model reveals that a firm should expand the product line for a development-intensive good only at intermediate values of cost advantage and quality loss. We modify the base model to include development capacity constraints as …
Equilibrium Financing In A Distribution Channel With Capital Constraint, Bing Jing, Xiangfeng Chen, Gangshu (George) Cai
Equilibrium Financing In A Distribution Channel With Capital Constraint, Bing Jing, Xiangfeng Chen, Gangshu (George) Cai
Information Systems and Analytics
There exist capital constraints in many distribution channels. We examine a channel consisting of one manufacturer and one retailer, where the retailer is capital constrained. The retailer may fund its business by borrowing credit either from a competitive bank market or from the manufacturer, provided the latter is willing to lend. When only one credit type (either bank or trade credit) is viable, we show that trade credit financing generally charges a higher wholesale price and thus becomes less attractive than bank credit financing for the retailer. When both bank and trade credits are viable, the unique equilibrium is trade …
Pricing Online Subscription Services Under Competition, Ram Bala
Pricing Online Subscription Services Under Competition, Ram Bala
Information Systems and Analytics
In recent times, rapid advances in the field of information technology have enabled firms selling information products (for example, in the form of a CD) to provide subscription services using remote servers. Making the product versus service decision involves a trade-off. Online subscription offerings are perceived to be of lower quality because of data security and network reliability issues but can reduce or even eliminate the credible commitment (of prices) problem typically faced by firms selling durable products. We model an infinite horizon game between two symmetric firms that choose the design architecture, that is, product or service (and consequent …
Exclusive Channels And Revenue Sharing In A Complementary Goods Market, Gangshu (George) Cai, Yue Dai, Sean X. Zhou
Exclusive Channels And Revenue Sharing In A Complementary Goods Market, Gangshu (George) Cai, Yue Dai, Sean X. Zhou
Information Systems and Analytics
This paper evaluates the joint impact of exclusive channels and revenue sharing on suppliers and retailers in a hybrid duopoly common retailer and exclusive channel model. The model bridges the gap in the literature on hybrid multichannel supply chains with bilateral complementary products and services with or without revenue sharing. The analysis indicates that, without revenue sharing, the suppliers are reluctant to form exclusive deals with the retailers; thus, no equilibrium results. With revenue sharing from the retailers to the suppliers, it can be an equilibrium strategy for the suppliers and retailers to form exclusive deals. Bargaining solutions are provided …
Consolidating Findings From Business Process Change Case Studies Using System Dynamics: The Example Of Employee Morale, Zuzana Kristekova, Marlen Christin Jurisch, Michael Schermann, Helmut Krcmar
Consolidating Findings From Business Process Change Case Studies Using System Dynamics: The Example Of Employee Morale, Zuzana Kristekova, Marlen Christin Jurisch, Michael Schermann, Helmut Krcmar
Information Systems and Analytics
In this paper, we explore system dynamics as a useful approach to consolidate findings from case studies on business process change (BPC) projects. We compile data from 65 BPC case studies to develop a system dynamics simulation model that helps us to investigate ‘employee morale’ as an important construct in BPC projects. We show that such simulation models consolidate the complex and often non-linear findings from BPC case studies in a way that makes it available to discourse among researchers, lecturers and students as well as BPC professionals. Thus, this paper contributes to knowledge management and learning by suggesting system …
Joint Logistics And Financial Services By A 3pl Firm, Xiangfeng Chen, Gangshu (George) Cai
Joint Logistics And Financial Services By A 3pl Firm, Xiangfeng Chen, Gangshu (George) Cai
Information Systems and Analytics
Integrated logistics and financial services have been practiced by third party logistics (3PL) firms for years; however, the literature has been silent on the value of 3PL firms as credit providers in budget-constrained supply chains. This paper investigates an extended supply chain model with a supplier, a budget-constrained retailer, a bank, and a 3PL firm, in which the retailer has insufficient initial budget and may borrow or obtain trade credit from either a bank (traditional role) or a 3PL firm (control role). Our analysis indicates that the control role model yields higher profits not only for the 3PL firm but …
Usage-Based Pricing Of Software Services Under Competition, Ram Bala, Scott Carr
Usage-Based Pricing Of Software Services Under Competition, Ram Bala, Scott Carr
Information Systems and Analytics
With the emergence of high speed networks, software firms have the ability to deploy ‘software as a service' and measure resource usage at the level of individual customers. This enables the implementation of usage-based pricing. We study both fixed and usage-based pricing schemes in a competitive setting where the firm incurs a transaction cost of monitoring usage if it implements usage-based pricing. Offering different pricing schemes helps to differentiate the firms and relax price competition, particularly at higher monitoring costs, even when competing firms offer the same service quality. However, the low usage customers acquired by offering usage-based pricing are …