IDEAS home Printed from https://ideas.repec.org/a/taf/ijecbs/v2y1995i1p65-86.html
   My bibliography  Save this article

Most-Favored Treatment Provisions as Nondiscrimination Guarantees

Author

Listed:
  • David Butz

Abstract

A firm employs suppliers who make specific investments. Because output demand is uncertain and the cost of enumerating contingencies high, the firm retains some unilateral control over the input quantities it purchases. To allay suppliers' concerns over potential opportunism the firm must commit not to pit them against one another ex post by threatening to buy less from those who refuse to discount their prices. By extending most-favored treatment guarantees the firm commits not to discriminate. In some circumstances this generates efficient and opportunism-free outcomes. In others it is less effective but may remain attractive relative to other options. Evidence from field market contracts for natural gas corroborates this nondiscrimination hypothesis.

Suggested Citation

  • David Butz, 1995. "Most-Favored Treatment Provisions as Nondiscrimination Guarantees," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 2(1), pages 65-86.
    • Handle: RePEc:taf:ijecbs:v:2:y:1995:i:1:p:65-86
    DOI: 10.1080/758521097
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/10.1080/758521097
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/758521097?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Fudenberg, Drew & Tirole, Jean, 1989. "Noncooperative game theory for industrial organization: An introduction and overview," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 5, pages 259-327, Elsevier.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Pinar Akman & Morten Hviid, 2005. "A Most-Favoured-Customer Guarantee with a Twist," Working Papers 05-8, Centre for Competition Policy, University of East Anglia.
    2. Spier, Kathryn E., 2001. "The Use of “Most-Favored-Nation” Clauses in Settlement of Litigation," Berkeley Olin Program in Law & Economics, Working Paper Series qt7hm4d39g, Berkeley Olin Program in Law & Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pierre-Pascal Gendron, 1996. "Corporation Tax Asymmetries: An Oligopolistic Supergame Analysis," Working Papers ecpap-96-04, University of Toronto, Department of Economics.
    2. Luigi Guiso & Tullio Jappelli, 2005. "Awareness and Stock Market Participation," Review of Finance, European Finance Association, vol. 9(4), pages 537-567.
    3. Gilles Duranton, 1997. "La nouvelle économie géographique : agglomération et dispersion," Économie et Prévision, Programme National Persée, vol. 131(5), pages 1-24.
    4. Lindbeck, Assar & Snower, Dennis J., 2003. "The Firm as a Pool of Factor Complementarities," IZA Discussion Papers 882, Institute of Labor Economics (IZA).
    5. James E. Alt & Barry Eichengreen, 1989. "Parallel And Overlapping Games: Theory And An Application To The European Gas Trade," Economics and Politics, Wiley Blackwell, vol. 1(2), pages 119-144, July.
    6. Choy, Marylin & Costa, Eduardo & Churata, Eloy, 2015. "Radiografía del costo del crédito en el Perú," Revista Estudios Económicos, Banco Central de Reserva del Perú, issue 30, pages 25-55.
    7. Harhoff, Dietmar & Wagner, Stefan, 2005. "Modelling the duration of patent examination at the European Patent Office," CEPR Discussion Papers 5283, C.E.P.R. Discussion Papers.
    8. K. Conrad, 2000. "Energy Tax and Competition in Energy Efficiency: The Case of Consumer Durables," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 15(2), pages 159-177, February.
    9. Dan Anderberg & Carlo Perroni, "undated". "Renegotiation of Social Contracts by Majority Rule," EPRU Working Paper Series 00-15, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    10. Raquel Arévalo Tomé & José‐María Chamorro‐Rivas, 2007. "Credible collusion in a model of spatial competition," Papers in Regional Science, Wiley Blackwell, vol. 86(4), pages 633-642, November.
    11. Sijm, Jos & Chen, Yihsu & Hobbs, Benjamin F., 2012. "The impact of power market structure on CO2 cost pass-through to electricity prices under quantity competition – A theoretical approach," Energy Economics, Elsevier, vol. 34(4), pages 1143-1152.
    12. Mason, Charles F. & Phillips, Owen R., 2000. "Vertical integration and collusive incentives: an experimental analysis," International Journal of Industrial Organization, Elsevier, vol. 18(3), pages 471-496, April.
    13. Anthony M. Marino & Ján Zábojník, 2006. "Merger, Ease Of Entry And Entry Deterrence In A Dynamic Model," Journal of Industrial Economics, Wiley Blackwell, vol. 54(3), pages 397-423, September.
    14. Barham, Bradford L. & Chavas, Jean-Paul, 1997. "Sunk Costs and Resource Mobility: Implications for Economic and Policy Analysis," 1997 Conference, August 10-16, 1997, Sacramento, California 197060, International Association of Agricultural Economists.
    15. Sexton, Richard J., 1991. "Game Theory: A Review With Applications To Vertical Control In Agricultural Markets," Working Papers 225865, University of California, Davis, Department of Agricultural and Resource Economics.
    16. Moiseeva, Ekaterina & Wogrin, Sonja & Hesamzadeh, Mohammad Reza, 2017. "Generation flexibility in ramp rates: Strategic behavior and lessons for electricity market design," European Journal of Operational Research, Elsevier, vol. 261(2), pages 755-771.
    17. David Besanko & Pierre Régibeau & Katharine E. Rockett, 2005. "A Multi‐Task Principal‐Agent Approach To Organizational Form," Journal of Industrial Economics, Wiley Blackwell, vol. 53(4), pages 437-467, December.
    18. John A. Weinberg, 1994. "Selling Federal Reserve payment services: one price fits all?," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 1-24.
    19. Gamal Atallah, 2002. "Vertical R&D Spillovers, Cooperation, Market Structure, and Innovation," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 11(3), pages 179-209.
    20. Ernst ten Heuvelhof & Martijn Leijten, 2013. "New Public Management and the new features of strategic behaviour," Chapters, in: Hugo Priemus & Bert van Wee (ed.), International Handbook on Mega-Projects, chapter 6, pages 111-130, Edward Elgar Publishing.

    More about this item

    Keywords

    Natural gas; Most-favored treatment provisions; Opportunism; Vertical contracts; JEL classifications: L14;
    All these keywords.

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:ijecbs:v:2:y:1995:i:1:p:65-86. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/CIJB20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.