Bilateral control and vertical contracts
Bilateral control and vertical contracts
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.
Rey, Patrick
e8c22864-6a8d-469a-aac6-ed57ee7b8f6e
Vergé, Thibaud
d4cfb087-7fd2-4612-8ebf-7057dc381d2e
2002
Rey, Patrick
e8c22864-6a8d-469a-aac6-ed57ee7b8f6e
Vergé, Thibaud
d4cfb087-7fd2-4612-8ebf-7057dc381d2e
Rey, Patrick and Vergé, Thibaud
(2002)
Bilateral control and vertical contracts.
CMPO Working Paper, (02/048).
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.
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Published date: 2002
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Local EPrints ID: 33362
URI: http://eprints.soton.ac.uk/id/eprint/33362
PURE UUID: bfe975f4-2d73-457d-a4a3-0578751e3b50
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Date deposited: 16 May 2006
Last modified: 11 Dec 2021 15:20
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Author:
Patrick Rey
Author:
Thibaud Vergé
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