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Vertical relations, opportunism, and welfare

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  • Germain Gaudin

    (European Commission [Brussels], Télécom ParisTech, SES - Département Sciences Economiques et Sociales - Télécom Paris - IMT - Institut Mines-Télécom [Paris] - IP Paris - Institut Polytechnique de Paris, ECOGE - Economie Gestion - I3 SES - Institut interdisciplinaire de l’innovation de Telecom Paris - Télécom Paris - IMT - Institut Mines-Télécom [Paris] - IP Paris - Institut Polytechnique de Paris - I3 - Institut interdisciplinaire de l’innovation - CNRS - Centre National de la Recherche Scientifique)

Abstract

This article revisits the opportunism problem faced by an upstream monopolist contracting with several retailers over secret agreements, when contracts are linear. We characterize the equilibrium under secret contracts and compare it to that under public contracts in a setting allowing for general forms of demand and retail competition. Market distortions are more severe under secret contracts if and only if retailers' instruments are strategic complements. We also investigate the effect of opportunism on firms' profits. Our results remain robust whether retailers hold passive or wary beliefs. We derive some implications for the antitrust analysis of information exchange between firms.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Germain Gaudin, 2019. "Vertical relations, opportunism, and welfare," Post-Print hal-02410462, HAL.
    • Handle: RePEc:hal:journl:hal-02410462
    DOI: 10.1111/1756-2171.12272
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    Cited by:

    1. Qing Hu & Aika Monden & Tomomichi Mizuno, 2022. "Downstream Cross‐Holdings and Upstream R&D," Journal of Industrial Economics, Wiley Blackwell, vol. 70(3), pages 775-789, September.
    2. Michele Bisceglia & Jorge Padilla & Salvatore Piccolo, 2019. "When Prohibiting Platform Parity Agreements Harms Consumers," CSEF Working Papers 542, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    3. Inderst, Roman & Griem, Fabian & Schaffer, Greg, 2022. "Tying under Double-Marginalization," CEPR Discussion Papers 17314, C.E.P.R. Discussion Papers.
    4. Ku-Chu Tsao & Jin-Li Hu & Hong Hwang & Yan-Shu Lin, 2023. "More licensed technologies may make it worse: a welfare analysis of licensing vertically two-tier foreign technologies," Journal of Economics, Springer, vol. 139(1), pages 71-88, June.
    5. Bisceglia, Michele & Padilla, Jorge & Piccolo, Salvatore, 2021. "When prohibiting wholesale price-parity agreements may harm consumers," International Journal of Industrial Organization, Elsevier, vol. 76(C).
    6. Do, Jihwan & Miklós-Thal, Jeanine, 2023. "Partial secrecy in vertical contracting," International Journal of Industrial Organization, Elsevier, vol. 90(C).
    7. Mao, Zhaofang & Han, Yuqing & Liang, Zhengbo, 2022. "Mode of store-brand introduction and contracting sequence under manufacturer encroachment," International Journal of Production Economics, Elsevier, vol. 253(C).
    8. Michele Bisceglia & Jorge Padilla, 2023. "On sellers' cooperation in hybrid marketplaces," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 32(1), pages 207-222, January.
    9. Cong Pan, 2018. "Supplier Encroachment and Consumer Welfare: Upstream Firm’s Opportunism and Multichannel Distribution," ISER Discussion Paper 1020, Institute of Social and Economic Research, Osaka University.
    10. Hunold, Matthias & Schlütter, Frank, 2022. "Supply Contracts under Partial Forward Ownership," LIDAM Discussion Papers CORE 2022003, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    11. Padilla, Jorge & Piccolo, Salvatore, 2020. "Does direct connect benefit travellers?," Economics Letters, Elsevier, vol. 188(C).
    12. Evensen, Charlotte B. & Foros, Øystein & Haugen, Atle & Kind, Hans Jarle, 2021. "Size-based input price discrimination under endogenous inside options," Discussion Paper Series in Economics 6/2021, Norwegian School of Economics, Department of Economics.
    13. Skartados, Panagiotis, 2022. "Disclosure regime of contract terms and bargaining in vertical markets," UC3M Working papers. Economics 34144, Universidad Carlos III de Madrid. Departamento de Economía.
    14. Konstantinos G. Papadopoulos & Emmanuel Petrakis & Panagiotis Skartados, 2022. "The ambiguous competitive effects of passive partial forward ownership," Southern Economic Journal, John Wiley & Sons, vol. 89(2), pages 540-568, October.
    15. Xi Li & Xinlong Li, 2023. "The Bright Side of Inequity Aversion," Management Science, INFORMS, vol. 69(7), pages 4210-4227, July.
    16. Dertwinkel-Kalt, Markus & Wey, Christian, 2021. "Multi-Product Pricing and Minimum Resale Price Maintenance," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242338, Verein für Socialpolitik / German Economic Association.
    17. Nicolas Pasquier, 2024. "Decentralization and Consumer Welfare with Substitutes or Complements," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 64(3), pages 449-469, May.
    18. Papadopoulos, Konstantinos G. & Skartados, Panagiotis, 2021. "The ambiguous competitive effects of passive partial forward integration," UC3M Working papers. Economics 33354, Universidad Carlos III de Madrid. Departamento de Economía.
    19. Pinopoulos, Ioannis N., 2019. "On the welfare effects of vertical integration: Opportunism vs. double marginalization," Economics Letters, Elsevier, vol. 174(C), pages 169-172.

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