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Endogenous Market Structures and Contract Theory. Delegation, principal-agent contracts, screening, franchising and tying

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  • Etro Federico

    () (Department of Economics, University Of Venice C� Foscari)

Abstract

I study the role of unilateral strategic contracts for firms active in markets with price competition and endogenous entry. Traditional results change substantially when the market structure is endogenous rather than exogenous. They concern 1) contracts of managerial delegation to non-profit maximizers, 2) incentive principal-agent contracts in the presence of moral hazard on cost reducing activities, 3) screening contracts in case of asymmetric information on the productivity of the managers, 4) vertical contracts of franchising in case of hold-up problems and 5) tying contracts by monopolists competing also in secondary markets. Firms use always these contracts to strengthen price competition and manage to obtain positive profits in spite of free entry.

Suggested Citation

  • Etro Federico, 2010. "Endogenous Market Structures and Contract Theory. Delegation, principal-agent contracts, screening, franchising and tying," Working Papers 2010_25, Department of Economics, University of Venice "Ca' Foscari".
  • Handle: RePEc:ven:wpaper:2010_25
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    References listed on IDEAS

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    Cited by:

    1. Cato, Susumu & Matsumura, Toshihiro, 2013. "Entry-License Tax: Stackelberg versus Cournot," MPRA Paper 81297, University Library of Munich, Germany, revised 12 Sep 2017.
    2. Cintya Lanchimba, 2013. "Optimal Monetary Provisions in Plural Form Franchise Systems ; A Theoretical Model of Incentives with Two Risk-Averse Agents," Working Papers 1321, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    3. Muriel Fadairo & Cyntia Lanchimba & Miguel Yangari, 2016. "Optimal Monetary Provisions and Risk Aversion in Plural Form Franchise Network. A Model of Incentives with Heterogeneous Agents," Working Papers 1602, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    4. Michela Cella & Federico Etro, 2016. "Contract competition between hierarchies, managerial compensation and imperfectly correlated shocks," Journal of Economics, Springer, vol. 118(3), pages 193-218, July.
    5. Etro, Federico, 2013. "Advertising and search engines. A model of leadership in search advertising," Research in Economics, Elsevier, vol. 67(1), pages 25-38.
    6. Anthony Creane & Thomas D. Jeitschko, 2016. "Endogenous Entry in Markets with Unobserved Quality," Journal of Industrial Economics, Wiley Blackwell, vol. 64(3), pages 494-519, September.
    7. Cintya Lanchimba, 2013. "Optimal Monetary Provisions in Plural Form Franchise Systems; A Theoretical Model of Incentives with Two Risk-Averse Agents," Working Papers halshs-00830899, HAL.
    8. Federico Etro, 2014. "Some thoughts on the Sutton approach," Journal of Economics, Springer, vol. 112(2), pages 99-113, June.
    9. Muriel Fadairo & Cintya Lanchimba & Miguel Yangari, 2016. "Optimal Monetary Provisions and Risk Aversion in Plural Form Franchise Networks A Model of Incentives with Heterogeneous Agents," Working Papers halshs-01251344, HAL.
    10. R. Cellini & L. Lambertini & G. I. P. Ottaviano, 2015. "To Know or Not To Know: Strategic Inattention and Endogenous Market Structure," Working Papers wp987, Dipartimento Scienze Economiche, Universita' di Bologna.
    11. Toshihiro Matsumura & Yasunori Okumura, 2014. "Comparison between specific taxation and volume quotas in a free entry Cournot oligopoly," Journal of Economics, Springer, vol. 113(2), pages 125-132, October.
    12. Cato, Susumu & Oki, Ryoko, 2011. "The top-dog and the lean and hungry look strategies in endogenous entry," Economic Modelling, Elsevier, vol. 28(6), pages 2776-2782.

    More about this item

    Keywords

    Strategic delegation; Incentive contracts; Screening contracts; Franchising; Tying; Endogenous market structures;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation

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