Title: Auctioning Distribution Contracts: Theory and Experiments

Speaker: Yan (Diana) Wu (San José State University)

Time: 10:00 (Tuesday), April 7th, 2026

Venue: Room 706, Mingde Business Building (Zhongguancun Campus)

Language: Chinese/ English

ABSTRACT：

This paper examines a channel distribution problem where a supplier allocates the exclusive right to sell her product among multiple potential retailers. These retailers possess private information on their own inventory costs, and once selected, order the product facing uncertain market demand. To tackle the supplier’s challenge of identifying efficient retailers and benefiting from improved channel coordination, we introduce new mechanisms that combine auction with supply chain contract design. In our approach, the supplier first specifies one contract term (either the wholesale price or fixed fee) in a two-part tariff, followed by retailers participate in a first-price-sealed-bid auction to determine the other contract term. The highest bidder becomes the winning retailer and places newsvendor orders. We conduct a comprehensive theoretical analysis of the two resulting hybrid mechanisms and further test them in the laboratory with human subjects. We find that empirical suppliers achieve far better profit performance under both hybrid mechanisms than predicted, despite making suboptimal decisions. We attribute this gap to retailers’ tendency to overbid and overorder, which we model behaviorally using mental accounting of cost components.