Vertical Opportunism, Bargaining, and Share-Based Agreements

Emmanuel Petrakis and Panagiotis Skartados ()
Additional contact information
Panagiotis Skartados: Athens University of Economics and Business

Review of Industrial Organization, 2022, vol. 60, issue 4, No 3, 549-565

Abstract: Abstract In a two-tier industry where an upstream monopolist supplies an essential input to horizontally differentiated downstream firms, two-part tariffs (TPTs) and share-based agreements (SBAs) are two contractual agreements for addressing potential double-marginalization problems. In this paper, we show that SBAs are not equivalent to TPTs. This holds under both secret and interim observable contract terms, as well as under quantity and price downstream competition. SBAs lead to higher wholesale and retail prices, and lower aggregate output, consumer surplus, and social welfare. However, under exclusive dealing between multiple upstream suppliers and downstream firms, these two types of vertical contracts are equivalent.

Keywords: Bargaining; Share-based agreements; Two-part tariffs; Vertical contracting; Vertical opportunism (search for similar items in EconPapers)
JEL-codes: L14 L42 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s11151-022-09869-8 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:revind:v:60:y:2022:i:4:d:10.1007_s11151-022-09869-8

Ordering information: This journal article can be ordered from
http://www.springer. ... on/journal/11151/PS2

DOI: 10.1007/s11151-022-09869-8

Access Statistics for this article

Review of Industrial Organization is currently edited by L.J. White

More articles in Review of Industrial Organization from Springer, The Industrial Organization Society Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().