Channel Contract Behavior: The Role of Risk Attitudes, Risk Perceptions, and Channel Members' Market Structures

Risk and uncertainty influence many channeldecisions, especially those in turbulent channelswith uncertain pay-offs. Managing or reducingsuch risk involves managing the vulnerabilityandvolatilityofcashflowstohelpcreateshare-holder value (Srivastava, Shervani, and Fahey1998). Such an effort requires the integration offinance and marketing (Rappaport 1986). A keyquestion is how risk reduction behaviors are in-fluencedbyriskperceptions,riskattitudes,andthe market structure across the buying side andthe selling side of the channel. Understandingand anticipating the resulting changes is espe-cially important in commodity and in technol-ogy industries where risk continually fluctuates(Anderson 1982). It is also critical in industrieswhere unpredicted events—such as productrecalls or food safety concerns—dramaticallyinfluence channel supply and demand of prod-ucts with prescribed characteristics (Pennings,Wansink, and Meulenberg 2002).Researchonriskmanagementinchannelsitua-tions often assumes risk aversion and focuses oneither risk perceptions or on risk attitudes. Sel-dom, however, have these two constructs—risk