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Price Authority and Information Sharing with Competing Principals

Author

Listed:
  • Enrique Andreu

    (Compass Lexecon)

  • Damien Neven

    (IHEID, Graduate Institute of International and Development Studies, Geneva)

  • Salvatore Piccolo

    (Bergamo University)

Abstract

We characterize the degree of price discretion that competing principals award their agents in a framework where agents are informed about demand and seek to pass on their unveriÂ…able distribution costs to consumers at the principalsÂ’ expense. Principals learn demand probabilistically and may exchange this information on a reciprocal basis. While equilibria with full price delegation never exist, partial delegation equilibria exist with and without information sharing and feature binding price caps (list prices) that prevent agents from passing on their distribution costs to consumers. Yet, these equilibria are more likely to occur with than without information sharing. Moreover, while principals exchange information when products are sufficiently differentiated and downstream distribution costs are not too low, expected prices are unambiguously lower with than without information sharing. These results have potential implications for recent and ongoing antitrust investigations and damage claims in prominent sectors both in the US and the EU.

Suggested Citation

  • Enrique Andreu & Damien Neven & Salvatore Piccolo, 2022. "Price Authority and Information Sharing with Competing Principals," IHEID Working Papers 29-2022, Economics Section, The Graduate Institute of International Studies.
  • Handle: RePEc:gii:giihei:heidwp29-2022
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    More about this item

    Keywords

    Competing Principals; Delegates Sales; Discretion; Information Sharing; List Prices;
    All these keywords.

    JEL classification:

    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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