Competing vertical structures : precommitment and renegotiation
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.
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