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.
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Bibliographic InfoPaper provided by Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 202.
Date of creation: 2003
Date of revision:
Publication status: Published in The RAND Journal of Economics, vol.�35, n°4, Winter 2004, p.�728-746.
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Other versions of this item:
- Patrick Rey & Thibaud Verge, 2002. "Bilateral Control with Vertical Contracts," The Centre for Market and Public Organisation 02/048, Department of Economics, University of Bristol, UK.
- Patrick Rey & Thibaud Vergé, 2003. "Bilateral Control with Vertical Contracts," Industrial Organization 0309005, EconWPA.
- 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
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