The value of transparency in dynamic contracting with entry

Gülen Karakoç, Marco Pagnozzi and Salvatore Piccolo

International Journal of Industrial Organization, 2022, vol. 85, issue C

Abstract: A manufacturer designs a long-term contract with a retailer who is privately informed about demand, and they face future competition by an entrant. When demand is correlated across periods, information about past sales affects firms’ behavior after entry. We analyze the incentives of the incumbent players to share this information with the entrant and show that the manufacturer and the retailer have contrasting preferences: when the retailer wants to disclose information, the manufacturer does not, and vice versa. Although transparency harms consumers and reduces total welfare, incumbent players jointly benefit from selling information to the entrant.

Keywords: Dynamic adverse selection; Entry; Information sharing; Transparency; Vertical contracting (search for similar items in EconPapers)
JEL-codes: D40 D82 D83 L11 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: The Value of Transparency in Dynamic Contracting with Entry (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:85:y:2022:i:c:s0167718722000522

DOI: 10.1016/j.ijindorg.2022.102876

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