"When Should Manufacturers Want Fair Trade?": New Insights from Asymmetric Information
AbstractWe study a specific model of competing manufacturer-retailer pairs where adverse selection and moral hazard are coupled with non-market externalities at the downstream level. In this simple framework we show that a “laissez- faire" approach towards vertical price control might harm consumers as long as privately informed retailers impose non-market externalities on each other. Giving manufacturers freedom to control retail prices harms consumers when retailers impose positive non-market externalities on each other, and the converse is true otherwise. Moreover, in contrast to previous work, we show that, in these instances, consumers' and suppliers' preferences over contractual choices are not necessarily aligned.
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Bibliographic InfoPaper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 218.
Date of creation: 12 Mar 2009
Date of revision: 08 Apr 2010
Publication status: Published in Journal of Economics & Management Strategy, 2011, Vol. 20, 649-677.
Competing hierarchies; resale price maintenance; retail externalities;
Find related papers by JEL classification:
- D2 - Microeconomics - - Production and Organizations
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-03-22 (All new papers)
- NEP-COM-2009-03-22 (Industrial Competition)
- NEP-CTA-2009-03-22 (Contract Theory & Applications)
- NEP-HPE-2009-03-22 (History & Philosophy of Economics)
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.:
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