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Endogenous market structures and contract theory: Delegation, principal-agent contracts, screening, franchising and tying

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  • Etro, Federico

Abstract

I study the role of unilateral strategic contracts for firms active in markets with price competition and endogenous entry. Traditional results change substantially when the market structure is endogenous rather than exogenous. They concern (1) contracts of managerial delegation to non-profit maximizers, (2) incentive principal-agent contracts in the presence of moral hazard on cost-reducing activities, (3) screening contracts in case of asymmetric information on the productivity of the managers, (4) vertical contracts of franchising in case of hold-up problems and (5) tying contracts by monopolists competing also in secondary markets. Firms use always these contracts to strengthen price competition and manage to obtain positive profits in spite of free entry.

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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 55 (2011)
Issue (Month): 4 (May)
Pages: 463-479

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Handle: RePEc:eee:eecrev:v:55:y:2011:i:4:p:463-479

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Web page: http://www.elsevier.com/locate/eer

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Keywords: Strategic delegation Incentive contracts Screening contracts Franchising Tying Endogenous market structures;

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Cited by:
  1. Cintya Lanchimba, 2013. "Optimal Monetary Provisions in Plural Form Franchise Systems ; A Theoretical Model of Incentives with Two Risk-Averse Agents," Working Papers 1321, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  2. Etro, Federico, 2013. "Advertising and search engines. A model of leadership in search advertising," Research in Economics, Elsevier, vol. 67(1), pages 25-38.
  3. Cintya Lanchimba, 2013. "Optimal Monetary Provisions in Plural Form Franchise Systems; A Theoretical Model of Incentives with Two Risk-Averse Agents," Working Papers halshs-00830899, HAL.

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