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Competing Vertical Structures: Precommitment and Renegotiation


  • Caillaud, Bernard
  • Jullien, B
  • Picard, P


The authors consider a model where two agents, privately informed about their own characteristics, play a game on behalf of two uninformed principals. They analyze the existence of recommitment effects through public announcement of contracts in a model where agency contracts, designed ex-ante, can always be secretly renegotiated. The authors show that the existence of precommitment effects depends both on the strategic complementarity of the agents' actions and on the direct effect of the opponents' actions on each principal's welfare. The results are introduced through an example of Cournot and Bertrand competition between firms, viewed as vertical structures. Copyright 1995 by The Econometric Society.

Suggested Citation

  • Caillaud, Bernard & Jullien, B & Picard, P, 1995. "Competing Vertical Structures: Precommitment and Renegotiation," Econometrica, Econometric Society, vol. 63(3), pages 621-646, May.
  • Handle: RePEc:ecm:emetrp:v:63:y:1995:i:3:p:621-46

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    References listed on IDEAS

    1. James Bergin, 1992. "Player Type Distributions as State Variables and Information Revelation in Zero Sum Repeated Games with Discounting," Mathematics of Operations Research, INFORMS, vol. 17(3), pages 640-656, August.
    2. Jackson, Matthew O. & Kalai, Ehud, 1997. "Social Learning in Recurring Games," Games and Economic Behavior, Elsevier, vol. 21(1-2), pages 102-134, October.
    3. Kalai, Ehud & Lehrer, Ehud, 1993. "Rational Learning Leads to Nash Equilibrium," Econometrica, Econometric Society, vol. 61(5), pages 1019-1045, September.
    4. Kalai, Ehud & Lehrer, Ehud, 1994. "Weak and strong merging of opinions," Journal of Mathematical Economics, Elsevier, vol. 23(1), pages 73-86, January.
    5. Lehrer, Ehud & Smorodinsky, Rann, 1997. "Repeated Large Games with Incomplete Information," Games and Economic Behavior, Elsevier, vol. 18(1), pages 116-134, January.
    6. Kandori, Michihiro & Mailath, George J & Rob, Rafael, 1993. "Learning, Mutation, and Long Run Equilibria in Games," Econometrica, Econometric Society, vol. 61(1), pages 29-56, January.
    7. Dov Samet, 1996. "Common Priors and Markov Chains," Game Theory and Information 9610008, EconWPA.
    8. Aumann, Robert J. & Heifetz, Aviad, 2002. "Incomplete information," Handbook of Game Theory with Economic Applications,in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 3, chapter 43, pages 1665-1686 Elsevier.
    9. Rothschild, Michael, 1974. "A two-armed bandit theory of market pricing," Journal of Economic Theory, Elsevier, vol. 9(2), pages 185-202, October.
    10. Dov Samet, 1996. "Looking Backwards, Looking Inwards: Priors and Introspection," Game Theory and Information 9610007, EconWPA.
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