A Note on the Value of Residual Claimancy with Competing Vertical Hierarchies
AbstractIn this short paper we study a competing vertical hierarchies model where the allocation of residual claimancy is endogenous and is determined jointly with production and contractual decisions. We find a set of circumstances in which the (equilibrium) allocation of residual claimancy is affected by competition in a non trivial manner. More precisely, although revenue-sharing contracts foster agents. (non-contractible) surplus enhancing effort, we show that competing principals dealing with exclusive and privately informed agents might still prefer to retain a share of the surplus from production when dealing with inefficient types. This is because reducing the surplus share of inefficient types reduces the information rent given up to efficient types. Hence, the equilibrium allocation of residual claimancy follows a pro-cyclical rule.
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 Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 291.
Date of creation: 01 Sep 2011
Date of revision:
Adverse selection; residual claimancy; vertical hierarchies;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-10-15 (All new papers)
- NEP-COM-2011-10-15 (Industrial Competition)
- NEP-CTA-2011-10-15 (Contract Theory & Applications)
- NEP-MIC-2011-10-15 (Microeconomics)
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.:
- Caillaud Bernard & Jullien Bruno & Picard Pierre, 1991.
"Competing vertical structures : precommitment and renegotiation,"
CEPREMAP Working Papers (Couverture Orange)
- Caillaud, Bernard & Jullien, B & Picard, P, 1995. "Competing Vertical Structures: Precommitment and Renegotiation," Econometrica, Econometric Society, vol. 63(3), pages 621-46, May.
- Bertoletti, Paolo & Poletti, Clara, 1996. "A Note on Endogenous Firm Efficiency in Cournot Models of Incomplete Information," Journal of Economic Theory, Elsevier, vol. 71(1), pages 303-310, October.
- Patrick Bolton & Mathias Dewatripont, 2005.
MIT Press Books,
The MIT Press,
edition 1, volume 1, number 0262025760, January.
- David Martimort, 1996.
"Exclusive Dealing, Common Agency, and Multiprincipals Incentive Theory,"
RAND Journal of Economics,
The RAND Corporation, vol. 27(1), pages 1-19, Spring.
- Martimort, D., 1992. "Exclusive Dealing, Common Agency and Multiprincipals Incentive Thoery," Papers 92.278, Toulouse - GREMAQ.
- Martimort, David, 1994. "Exclusive Dealing, Common Agency and Multiprincipals Incentive Theory," IDEI Working Papers 43, Institut d'Économie Industrielle (IDEI), Toulouse, revised 1996.
- Bertoletti, Paolo & Poletti, Clara, 1997. "X-Inefficiency, Competition and Market Information," Journal of Industrial Economics, Wiley Blackwell, vol. 45(4), pages 359-75, December.
- Martin Stephen, 1993. "Endogenous Firm Efficiency in a Cournot Principal-Agent Model," Journal of Economic Theory, Elsevier, vol. 59(2), pages 445-450, April.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lia Ambrosio).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.