Vertical Control with Bilateral Contracts
AbstractIt is widely believed that a supplier who distributes her product through retailers can achieve the vertically integrated outcome with nonlinear contracts, provided the retail price is the only target of control and there is no uncertainty. We show that this result fails when retailers cannot observe their rivals' contracts, as incentives to choose each contract to maximize bilateral profits may yield retail prices well below the vertically integrated level. This provides a new explanation for vertical restraints, and it rationalizes an oft-expressed but never formalized view that resale price maintenance prevents countervailing buyer power from lowering retail prices.
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 The RAND Corporation in its journal RAND Journal of Economics.
Volume (Year): 23 (1992)
Issue (Month): 3 (Autumn)
Contact details of provider:
Web page: http://www.rje.org
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. 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: ().
If references are entirely missing, you can add them using this form.