Optimal Retail Contracts with Asymmetric Information and Moral Hazard
Benjamin F. Blair and
RAND Journal of Economics, 1994, vol. 25, issue 2, pages 284-296
Constrained joint-profit-maximizing retail contracts are derived when the dealer is privately informed about demand conditions before contracting with the manufacturer. Demand is increased by dealer promotion, which is unobservable by the manufacturer. Consequently, the manufacturer does not know whether to attribute a low level of sales to a decline in demand or to a lack of promotion. We show that, in general, the optimal contract exhibits some form of resale price maintenance and quantity fixing. The type of resale price maintenance and quantity fixing depends on how price and quantity affect the link between sales and promotion.
References: Add references at CitEc
Citations View citations in EconPapers (17) Track citations by RSS feed
Downloads: (external link)
http://links.jstor.org/sici?sici=0741-6261%2819942 ... O%3B2-T&origin=repec full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: http://EconPapers.repec.org/RePEc:rje:randje:v:25:y:1994:i:summer:p:284-296
Ordering information: This journal article can be ordered from
https://editorialexp ... i-bin/rje_online.cgi
Access Statistics for this article
RAND Journal of Economics is currently edited by Summer
More articles in RAND Journal of Economics from The RAND Corporation
Series data maintained by ().