The value of losing control: Competition in markets for complements

When selling complementary products, manufacturers can often benefit from considering the resulting cross‐market interdependencies. Although using independent retailers makes it difficult to internalize these positive externalities, the ensuing double marginalization can mitigate within‐market competition. We use standard game theoretic analysis to determine optimal distribution channel strategies (through independent retailers or integrated) for competing manufacturers who participate in markets for complements. Our results suggest that a firm's optimal channel choice is highly dependent on its competitive positioning. A firm with a competitive advantage in terms of product characteristics (customer preferences) or production capabilities (cost) might benefit from selling through company‐controlled stores, allowing coordinated pricing across the two markets, whereas a less competitive firm might be better off using independent channel intermediaries to mitigate price competition. We consider two scenarios depending on whether the two firms make their distribution channel decisions sequentially or simultaneously. Although firms are unlikely to make such decisions at exactly the same instant, the simultaneous model also serves as a proxy for the scenario where firms decide sequentially, but where they cannot observe each other's strategic channel choices. For the sequential case, we find that the sequence of entry can have tremendous impact on the two firms'profits; whereas in some cases, the first mover can achieve substantially higher profits, we find that when the two markets are of sufficiently different size and only loosely related, a firm with a competitive advantage might be better off as a follower. Interestingly, our results suggest that, when the markets are of rather similar size, both firms are better off if they enter the industry sequentially. In those cases, the first entrant has incentive to reveal its planned channel strategies, and the follower has incentive to seek out and consider this information. © 2010 Wiley Periodicals, Inc. Naval Research Logistics, 2010     

Strategic capacity decision‐making in a stochastic manufacturing environment using real‐time approximate dynamic programming

In this study, we illustrate a real‐time approximate dynamic programming (RTADP) method for solving multistage capacity decision problems in a stochastic manufacturing environment, by using an exemplary three‐stage manufacturing system with recycle. The system is a moderate size queuing network, which experiences stochastic variations in demand and product yield. The dynamic capacity decision problem is formulated as a Markov decision process (MDP). The proposed RTADP method starts with a set of heuristics and learns a superior quality solution by interacting with the stochastic system via simulation. The curse‐of‐dimensionality associated with DP methods is alleviated by the adoption of several notions including “evolving set of relevant states,” for which the value function table is built and updated, “adaptive action set” for keeping track of attractive action candidates, and “nonparametric k nearest neighbor averager” for value function approximation. The performance of the learned solution is evaluated against (1) an “ideal” solution derived using a mixed integer programming (MIP) formulation, which assumes full knowledge of future realized values of the stochastic variables (2) a myopic heuristic solution, and (3) a sample path based rolling horizon MIP solution. The policy learned through the RTADP method turned out to be superior to polices of 2 and 3. © 2010 Wiley Periodicals, Inc. Naval Research Logistics 2010     

Shifted Roles: Explaining Danish and Norwegian Alliance Strategy 1949–2009

During their 60 years within the North Atlantic Treaty Organisation (NATO), Denmark and Norway have experienced both high and low standings within the alliance, which can be attributed to both external and internal factors influencing their alliance strategies. During the ‘first’ Cold War and Détente, 1949–79, Danish and Norwegian alliance strategy aimed to simultaneously deter and reassure the Soviet Union. During the ‘second’ Cold War, 1979–89, Danish alliance policy became driven by domestic politics, and the Danish government was forced to formally dissociate the country from NATO's policies. Norway was not uncritical, but held a much lower profile. After the Cold War this situation shifted. Denmark successfully rehabilitated itself as a loyal and dependable ally by responding to the call for focusing on out-of-area operations. Meanwhile, Norway's continued focus on the lingering Russian Threat made the country seem out-of-touch with priorities in the post-Cold War alliance, and domestic politics prevented a more active out-of-area engagement.     

China's Global Equity Oil Investments: Economic and Geopolitical Influences

In this article, we construct and analyze an original database of overseas Chinese equity oil investments (EOI) in order to assess the relative importance of economic and geopolitical factors in determining the type of countries that are most likely to receive those investments. We find that China's national oil companies (NOCs) choose to make considerable investments in certain oil rich countries while ignoring others. We develop and examine ‘economic opportunity’ and ‘geopolitical relevance’ explanations of Chinese EOI. The economic explanation assumes that Chinese oil companies operate autonomously despite the fact that they are state owned, and that they seek international experience in countries offering less competition but more risk. The geopolitical explanation suggests that Chinese equity oil investments are developed and coordinated by the central government as part of a geopolitical strategy that is designed to bypass the so-called ‘Malacca Dilemma’ and deepen security ties with oil-rich states through the conduct of oil diplomacy. We argue that Chinese EOI tends to reflect both corporate interests and government priorities, and that it generates more liabilities rather than benefits for China.     

Managing Global Counterinsurgency: The Special Group (CI) 1962–1966

The contemporary American counterinsurgency discourse has emphasised a particular historical narrative of Vietnam to justify large-scale military operations in Iraq and Afghanistan. Absent from this narrative is any reference to the broader Cold War context in which Vietnam existed alongside numerous other small-scale counterinsurgencies and was therefore the exception, not the rule. This article seeks to redress this shortcoming by examining the way counterinsurgency was conceived and managed at the level of ‘grand strategy.’ Specifically, it focuses on the Special Group (Counterinsurgency) to demonstrate that senior policymakers under Presidents Kennedy and Johnson understood ‘counterinsurgency’ as involving ‘indirect’ assistance to foreign governments, rather than taking ‘direct’ military action with American ground forces.     

Book reviews

John Horsfield, The Art of Leadership in War. The Royal Navy From the Age of Nelson to the End of World War II. Westport, Conn. and London: Greenwood Press, 1980. Pp. 240; £14.75.

John Joseph Timothy Sweet, Iron Arm: The Mechanization of Mussolini's Army, 1920–1940. Westport, Connecticut &; London: Greenwood Press. 1980. Pp. 207; £15.50.

Peter H. Merkl, The Making of a Stormtrooper. Princeton, N.J: Princeton U.P., 1980. Pp. 328; £8.60.

Greg Herken, The Winning Weapon: The Atomic Bomb in the Cold War 1945–1950. New York: Alfred A. Knopf, 1980. Pp. 425; $15.00.

Geoffrey Smith and Nelson W. Polsby, British Government and its Discontents. New York: Basic Books, and London: Harper and Row, 1981. Pp. 202; £7.95.

Seweryn Bialer (ed.), The Domestic Context of Soviet Foreign Policy. Boulder, Colorado: Westview Press and London: Croom Helm, 1981. Pp. 441; £14.95.

Jerry F. Hough, Soviet Leadership in Transition. Washington, D.C.: Brookings Institution and Oxford, Basil Blackwell, 1981. Pp. 175; £12.00 (hb.) and £3.95 (pb.)

Edward F. Mickolus, Transnational Terrorism: A Chronology of Events 1968–1979. London: Aldwych Press, 1980. Pp. 967; £39.95.

Barry Rubin, The Great Powers in the Middle East, 1941–47; The Road to the Cold War, London: Frank Cass, 1980. Pp. 254; £14.50;

Daniel Heradstveit, The Arab‐Israeli Conflict; Psychological Obstacles to Peace. Oslo: Universittsforlaget, 1979. Pp. 234; £11.60;

Janice Gross Stein, and Raymond Tanter, Rational Decision‐making; Israel's Security Choices 1967. Columbus. Ohio; Ohio State University Press, 1980. Pp. 399; $35.     

When the Going Gets Tough… Monitoring Missions and a Changing Conflict Environment in Sri Lanka, 2002–2008

This article analyzes how the conflict environment in which a civilian monitoring mission is deployed influences the monitors' assessment of the operation. It draws on unique empirical material from the experience of the Sri Lanka Monitoring Mission (SLMM), deployed to oversee a ceasefire agreement in Sri Lanka 2002–2008. With material from a survey and in-depth interviews, experiences of the monitors are analyzed and changes over time are traced in relation to the monitors' assessment of the mandate and organizational set-up of the mission. The study points to the difficulty of monitoring missions to address escalation during an ongoing peace process. Its function is dependent on the goodwill of the parties. In essence, monitoring missions have the potential to strengthen peace when there is momentum in favor of progress, but when relations between the parties turn sour and the conflict escalates a civilian monitoring mission basically loses its potential. During the final stages of the war, which saw a very large number of civilian casualties, the war-torn areas were closed to international observers. Moreover, international pressure for a short-term ceasefire to alleviate the humanitarian situation was dismissed by the Sri Lankan government, which also saw the backing of several important actors, not the least China.