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Complementary Monopolies with asymmetric information

Author

Listed:
  • Didier Laussel

    (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

  • Joana Resende

    (CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain = Catholic University of Louvain, Economics Department, University of Porto)

Abstract

We investigate how asymmetric information on final demand affects strategic interaction between a downstream monopolist and a set of upstream monopolists, who independently produce complementary inputs. We study an intrinsic private common agency game in which each supplier i independently proposes a pricing schedule contract to the assembler, specifying the supplier's payment as a function of the assembler's purchase of input i. We provide a necessary and sufficient equilibrium condition. A lot of equilibria satisfy this condition but there is a unique Pareto-undominated Nash equilibrium from the suppliers' point of view. In this equilibrium, there are unavoidable efficiency losses due to excessively low sales of the good. However, suppliers may be able to limit these distortions by implicitly coordinating on an equilibrium with a rigid (positive) output in bad demand circumstances.

Suggested Citation

  • Didier Laussel & Joana Resende, 2023. "Complementary Monopolies with asymmetric information," Working Papers hal-02470541, HAL.
    • Handle: RePEc:hal:wpaper:hal-02470541
    DOI: 10.1007/s00199-019-01197-5
    Note: View the original document on HAL open archive server: https://amu.hal.science/hal-02470541
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