Jakub Kastl (Stanford University) David Martimort (Toulouse School of Economics) Salvatore Piccolo () (University of Naples "Federico II", CSEF and Toulouse School of Economics,)
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We 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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Paper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number
218.
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 K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
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