Correlated Contracts in Oligopoly
AbstractThe author considers a market that consists of two competing franchise systems and focuses attention on franchise agreements that specify the payment of the franchisees as a quantity contingent nonlinear price schedule. At the equilibrium, the schedule of wholesale prices reflects both an 'informational' and a 'strategic' component, where the informational component is weakened if the unit costs of competing franchisees are correlated. One of the multiple equilibria that exist with correlation enables each franchiser to extract the complete producer surplus. Franchisers may prefer, however, other equilibria where franchisees can earn positive informational rents. Copyright 1995 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
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Bibliographic InfoArticle provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.
Volume (Year): 36 (1995)
Issue (Month): 1 (February)
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- Walter A Cont, 2001. "Essays on Contract Design: Delegation and Agency Problems, and Monitoring Under Collusion," Levine's Working Paper Archive 625018000000000122, David K. Levine.
- Kirstein, Roland & Kirstein, Annette, 2004.
"Inefficient Intra-Firm Incentives Can Stabilize Cartels in Cournot Oligopolies,"
CSLE Discussion Paper Series
2004-09, Saarland University, CSLE - Center for the Study of Law and Economics.
- Roland Kirstein & Annette Kirstein, 2007. "Inefficient Intra-Firm Incentives Can Stabilize Cartels in Cournot Oligopolies," FEMM Working Papers 07004, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
- Lin, Ping, 2006. "Strategic spin-offs of input divisions," European Economic Review, Elsevier, vol. 50(4), pages 977-993, May.
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