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The Organization of Supplier Networks: Effects of Delegation and Intermediation

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  • Dilip Mookherjee
  • Masatoshi Tsumagari

Abstract

In a one-principal two-agent model with adverse selection and collusion among agents, we show that delegating to one agent the right to subcontract with the other agent always earns lower profit for the principal compared with centralized contracting. Delegation to an intermediary is also not in the principal's interest if the agents supply substitutes. It can be beneficial if the agents produce complements and the intermediary is well informed. Copyright The Econometric Society 2004.

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  • Dilip Mookherjee & Masatoshi Tsumagari, 2004. "The Organization of Supplier Networks: Effects of Delegation and Intermediation," Econometrica, Econometric Society, vol. 72(4), pages 1179-1219, July.
    • Handle: RePEc:ecm:emetrp:v:72:y:2004:i:4:p:1179-1219
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