Secret contracting and Nash-in-Nash bargaining

Emanuele Bacchiega () and Olivier Bonroy
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Emanuele Bacchiega: Alma Mater Studiorum-Università di Bologna

SN Business & Economics, 2021, vol. 1, issue 11, 1-7

Abstract: Abstract In take-it-or-leave-it vertical contracting, an equilibrium with passive beliefs may fail to exist. We argue that this problem can be alleviated by tackling the contracting stage of the game through a cooperative approach. The outcome of the take-it-or-leave-it game then coincides with the limit of the cooperative solution when the bargaining power of the downstream firms tends to zero. We argue that the cooperative approach, which requires a different interpretation of the out-of-equilibrium beliefs, is not affected by the well-known existence problems of the non-cooperative one.

Keywords: Multilateral vertical contracting; Passive beliefs; Nash bargaining solution (search for similar items in EconPapers)
JEL-codes: D43 L13 L14 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s43546-021-00162-6

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