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Endogenous Market Structures and Contract Theory

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  • Federico Etro

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Abstract

I study the role of unilateral strategic contracts for firms active in markets with price competition and endogenous entry. Traditional results change substantially when the market structure is endogenous rather than exogenous. They concern 1) contracts of managerial delegation to non-profit maximizers, 2) incentive contracts in the presence of moral hazard on cost reducing activities, 3) screening contracts in case of asymmetric information on the productivity of the managers, 4) vertical contracts of franchising in case of hold-up problems and 5) tying contracts by monopolists competing also in secondary markets. Firms use always these contracts to strengthen price competition and manage to obtain positive pro?ts in spite of free entry.

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File URL: http://dipeco.economia.unimib.it/repec/pdf/mibwpaper181.pdf
File Function: First version, 2010
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Bibliographic Info

Paper provided by University of Milano-Bicocca, Department of Economics in its series Working Papers with number 181.

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Length: 27 pages
Date of creation: Mar 2010
Date of revision: Mar 2010
Handle: RePEc:mib:wpaper:181

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Related research

Keywords: Strategic delegation; Incentive contracts; Screening contracts; Franchising; Tying; Endogenous market structures;

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References

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  24. Bonanno, Giacomo & Vickers, John, 1988. "Vertical Separation," Journal of Industrial Economics, Wiley Blackwell, vol. 36(3), pages 257-65, March.
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Cited by:
  1. Aggey Semenov & Julian Wright, 2011. "Entry deterrrence via renegotiation-proof non-exclusive contracts," Working Papers 1105E, University of Ottawa, Department of Economics.

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