Bilateral control and vertical contracts


Rey, Patrick and Vergé, Thibaud (2002) Bilateral control and vertical contracts. CMPO Working Paper, (02/048)

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Description/Abstract

When a manufacturer contracts secretly with competing retailers he is subject to opportunism, and linear or non-linear tariffs may not allow the manufacturer to maintain monopoly prices. To analyse the effects of RPM, O'Brien-Shaffer (1992) use a concept of contract equilibrium which concentrates on pairwise deviations thereby questioning the robustness of the analysis. This paper emphasises the distinction between the contract equilibrium and standard non-cooperative concepts. We advocate for some caution in the use of the former concept, as if overlooks an inexistence problem. We then confirm the intuition that RPM can help solve the manufacturer's commitment problem. This confirms that O'Brien-Shaffer's insight is robust and validates the courts' reluctance against RPM.

Item Type: Article
Related URLs:
Subjects: H Social Sciences > H Social Sciences (General)
Divisions: University Structure - Pre August 2011 > School of Social Sciences > Economics
ePrint ID: 33362
Date Deposited: 16 May 2006
Last Modified: 27 Mar 2014 18:20
Contact Email Address: T.Verge@soton.ac.uk
URI: http://eprints.soton.ac.uk/id/eprint/33362

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