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The impact on vertical contracting of a type-dependent reservation utility is investigated within a sequential monopolies environment with asymmetric information. The welfare and private properties of contracts controlling both the retail price and the sales level are compared with those restricting only sales. When firms choose contracts non-cooperatively, retail price restrictions are desirable for the upstream supplier although detrimental to consumers, whenever the retailer reservation utility has a relevant impact on optimal contracts. If this impact is relatively weak and contracts are chosen cooperatively, vertical price control fails to maximize firms' joint-profit although it would be beneficial to consumers. Copyright 2008 The Authors. Journal compilation 2008 Blackwell Publishing Ltd. and the Editorial Board of The Journal of Industrial Economics.

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  • Antonio Acconcia & Riccardo Martina & Salvatore Piccolo, 2008. "VERTICAL RESTRAINTS UNDER ASYMMETRIC INFORMATION: ON THE ROLE OF PARTICIPATION CONSTRAINTS -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 56(2), pages 379-401, June.
  • Handle: RePEc:bla:jindec:v:56:y:2008:i:2:p:379-401

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    References listed on IDEAS

    1. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    2. Richard Blundell & Stephen Bond, 2000. "GMM Estimation with persistent panel data: an application to production functions," Econometric Reviews, Taylor & Francis Journals, vol. 19(3), pages 321-340.
    3. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
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    Cited by:

    1. Daniel Danau & Annalisa Vinella, 2017. "Contractual design in agency problems with non-monotonic cost and correlated information," SERIES 02-2017, Dipartimento di Economia e Finanza - Università degli Studi di Bari "Aldo Moro", revised Mar 2017.

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