Opportunism in Multilateral Vertical Contracting: Nondiscrimination, Exclusivity, and Uniformity
Randolph McAfee and
American Economic Review, 1994, vol. 84, issue 1, 210-30
An input supplier selling to competing downstream firms would benefit from publicly committing at the outset to all contracts. Efficient commitment, however, would require complete contracts. The authors study instead bilateral contracting, without commitment regarding others' terms. Each firm then fears that the supplier might opportunistically renegotiate another's contract to increase bilateral profit at the firm's expense. The authors show that nondiscrimination clauses generally cannot curb such third-party opportunism, even with symmetric firms. To reassure firms, crude forms of commitment may be adopted. This could explain the pervasiveness of exclusivity arrangements and the striking uniformity and intertemporal rigidity of franchise contracts. Copyright 1994 by American Economic Association.
References: Add references at CitEc
Citations: View citations in EconPapers (270) Track citations by RSS feed
Downloads: (external link)
http://links.jstor.org/sici?sici=0002-8282%2819940 ... O%3B2-C&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: https://EconPapers.repec.org/RePEc:aea:aecrev:v:84:y:1994:i:1:p:210-30
Ordering information: This journal article can be ordered from
Access Statistics for this article
American Economic Review is currently edited by Esther Duflo
More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().