Complementary Monopolies with Asymmetric Information

Didier Laussel () and Joana Resende

No 1842, AMSE Working Papers from Aix-Marseille School of Economics, France

Abstract: We investigate how asymmetric information on final demand affects strategic interaction between a downstream monopolist and a set of up-stream 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.

Keywords: complementary inputs; asymmetric information; private common agency games (search for similar items in EconPapers)
JEL-codes: D82 L22 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2018-12
New Economics Papers: this item is included in nep-com, nep-cta, nep-ind and nep-mic
References: Add references at CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Complementary Monopolies with asymmetric information (2020)
Working Paper: Complementary Monopolies with Asymmetric Information (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:aim:wpaimx:1842

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