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Vertical integration maintenance commitments

Pu-yan Nie, Chan Wang and Yong-cong Yang

Journal of Retailing and Consumer Services, 2019, vol. 47, issue C, 11-16

Abstract: To meet the maintenance of durable goods, it is considered that maintenance commitments have a significant impact on consuming decisions. To make this article more realistic, we are devoted to address maintenance commitments for goods with high expenditures to maintain under vertical integration structure. Establishing Principal-agent model of the guarantee time limited to maintain these special goods, this article argues the existence of optimal contract. In the light of the principal-agent model, the net profit of the higher efficiency maintainer is positive while the lower efficiency one attains zero profit. The vertical merger is also discussed in this work.

Keywords: Market structure; Principal-agent model; Industrial organization; Maintenance; Commitment; Game theory (search for similar items in EconPapers)
JEL-codes: L1 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.jretconser.2018.10.008

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