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Secret contracting and Nash-in-Nash bargaining

Author

Listed:
  • Emanuele Bacchiega

    (UNIBO - Alma Mater Studiorum Università di Bologna = University of Bologna)

  • Olivier Bonroy

    (GAEL - Laboratoire d'Economie Appliquée de Grenoble - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - UGA - Université Grenoble Alpes - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - UGA - Université Grenoble Alpes)

Abstract

In take-it-or-leave-it vertical contracting, an equilibrium with passive beliefs may fail to exist. We argue that this problem can be alleviated by tackling the contracting stage of the game through a cooperative approach. The outcome of the take-it-or-leave-it game then coincides with the limit of the cooperative solution when the bargaining power of the downstream firms tends to zero. We argue that the cooperative approach, which requires a different interpretation of the out-of-equilibrium beliefs, is not affected by the well-known existence problems of the non-cooperative one.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Emanuele Bacchiega & Olivier Bonroy, 2021. "Secret contracting and Nash-in-Nash bargaining," Post-Print hal-03402998, HAL.
    • Handle: RePEc:hal:journl:hal-03402998
    DOI: 10.1007/s43546-021-00162-6
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    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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