Suppose that a representative downstream firm must buy relationship-specific capital before trading with an upstream monopolist. Under reasonable conditions, the monopolist would precommit to price to induce greater investment. If the monopolist were privately informed of its unit costs after the downstream firms invested, then the optimal contract would specify a maximum (" list") price which might be discounted (to "transactions" prices) if costs were low: a mode of pricing prevalent in interfirm trade. These results may explain why G. J. Stigler and J. K. Kindahl's medium-term price series tracked wholesale price indices whenever the latter were nondecreasing, but otherwise fell significantly faster. Copyright 1990 by The Econometric Society.
(This abstract was borrowed from another version of this item.)
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||1988|
|Contact details of provider:|| Postal: Israel TEL-AVIV UNIVERSITY, THE FOERDER INSTITUTE FOR ECONOMIC RESEARCH, RAMAT AVIV 69 978 TEL AVIV ISRAEL.|
Web page: http://econ.tau.ac.il/foerder/about
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:fth:teavfo:38-88. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Krichel)
If references are entirely missing, you can add them using this form.