Bilateral Control with Vertical Contracts
AbstractWhen a manufacturer contracts secretly with competing retailers he is subject to opportunism, and linear or non-linear tariffs may not allow the manufacturer to maintain monopoly prices. To analyse the effects of RPM, O'Brien-Shaffer (1992) use a concept of contract equilibrium which concentrates on pairwise deviations thereby questioning the robustness of the analysis. This paper emphasises the distinction between the contract equilibrium and standard non-cooperative concepts. We advocate for some caution in the use of the former concept, as if overlooks an inexistence problem. We then confirm the intuition that RPM can help solve the manufacturer's commitment problem. This confirms that O'Brien-Shaffer's insight is robust and validates the courts' reluctance against RPM.
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 InfoPaper provided by Department of Economics, University of Bristol, UK in its series The Centre for Market and Public Organisation with number 02/048.
Length: 36 pages
Date of creation: Jul 2002
Date of revision:
secret contracts; passive beliefs; wary beliefs; resale price maintenance;
Other versions of this item:
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Patrick de Graba, 1996. "Most-Favored-Customer Clauses and Multilateral Contracting: When Nondiscrimination Implies Uniformity," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 5(4), pages 565-579, December.
- McAfee, R Preston & Schwartz, Marius, 1994. "Opportunism in Multilateral Vertical Contracting: Nondiscrimination, Exclusivity, and Uniformity," American Economic Review, American Economic Association, vol. 84(1), pages 210-30, March.
- Hart, O. & Tirole, J., 1990. "Vertical Integration And Market Foreclosure," Working papers 548, Massachusetts Institute of Technology (MIT), Department of Economics.
- Henrick Horn & Asher Wolinsky, 1988.
"Bilateral Monopolies and Incentives for Merger,"
RAND Journal of Economics,
The RAND Corporation, vol. 19(3), pages 408-419, Autumn.
- Martin, Stephen & Normann, Hans-Theo & Snyder, Christopher M, 2001. "Vertical Foreclosure in Experimental Markets," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 466-96, Autumn.
- Rey, Patrick & Tirole, Jean, 2003.
"A Primer on Foreclosure,"
IDEI Working Papers
203, Institut d'Économie Industrielle (IDEI), Toulouse, revised Nov 2005.
- DeGraba, Patrick & Postlewaite, Andrew, 1992. "Exclusivity Clauses and Best Price Policies in Input Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 1(3), pages 423-54, Fall.
- Ilya Segal & Michael D. Whinston, 2003. "Robust Predictions for Bilateral Contracting with Externalities," Econometrica, Econometric Society, vol. 71(3), pages 757-791, 05.
- Daniel P. O'Brien & Greg Shaffer, 1992. "Vertical Control with Bilateral Contracts," RAND Journal of Economics, The RAND Corporation, vol. 23(3), pages 299-308, Autumn.
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.