Channel contract behavior: The role of risk attitudes, risk perceptions, and channel members' market structures

By integrating elements of both marketing and finance, we show how risk influences channel contract behavior. We model risk behavior as the interaction between risk attitude and risk perception (IRAP). An analysis of the joint channel decisions of 208 producers, wholesalers, and processors provides three results. First, risk attitudes significantly vary across different levels of channel members. Second, IRAP - in combination with the channel member's market structure on the buying and selling side is a strong predictor of contract behavior. Third, increases in channel power strengthen the impact of IRAP on channel contract behavior.