Bilateral Control with Vertical Contracts

Patrick Rey and Thibaud Vergé

The Centre for Market and Public Organisation from The Centre for Market and Public Organisation, University of Bristol, UK

Abstract: When a manufacturer contracts secretly with competing retailers he is subject to opportunism, and linear or non-linear tariffs may not allow the manufacturer to maintain monopoly prices. To analyse the effects of RPM, O'Brien-Shaffer (1992) use a concept of contract equilibrium which concentrates on pairwise deviations thereby questioning the robustness of the analysis. This paper emphasises the distinction between the contract equilibrium and standard non-cooperative concepts. We advocate for some caution in the use of the former concept, as if overlooks an inexistence problem. We then confirm the intuition that RPM can help solve the manufacturer's commitment problem. This confirms that O'Brien-Shaffer's insight is robust and validates the courts' reluctance against RPM.

Keywords: secret contracts; passive beliefs; wary beliefs; resale price maintenance (search for similar items in EconPapers)
JEL-codes: D84 L14 L42 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2002-07
New Economics Papers: this item is included in nep-mfd
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Related works:
Journal Article: Bilateral Control with Vertical Contracts (2004)
Working Paper: Bilateral Control with Vertical Contracts (2003)
Working Paper: Bilateral Control with Vertical Contracts (2003)
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