Cost reducing strategies
AbstractWe consider an industry where one of the manufacturers and its supplier (S) have engaged in some specific investment in the past. We assume that this has three consequences: S has lower expected production costs than other suppliers, supplier-switching costs exist, and the manufacturer may limit its rivals’ access to S. In the case when only S knows its true production costs, we compare alternative mechanisms to induce S to reveal its private information, namely, paying informational rents, using threats of switching suppliers, and most importantly, permitting S to serve other firms. We prove that the presence of asymmetric information mitigates the manufacturer’s incentives to engage in vertical restraints. We derive several policy implications from this result.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Fundación SEPI in its journal Investigaciones Economicas.
Volume (Year): 27 (2003)
Issue (Month): 1 (January)
Contact details of provider:
Postal: Investigaciones Economicas Fundación SEPI Quintana, 2 (planta 3) 28008 Madrid Spain
Web page: http://www.fundacionsepi.es/
Other versions of this item:
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Isabel Sánchez-Seco).
If references are entirely missing, you can add them using this form.