The Strategic Value of Quantity Forcing Contracts

David Martimort and Salvatore Piccolo ()

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Abstract: We explore the strategic value of quantity forcing contracts in a manufacturer-retailer environment under both adverse selection and moral hazard. Manufacturers dealing with (exclusive) competing retailers may prefer to leave contracts silent on retail prices, whenever other aspects of the retailers' activity remain nonverifiable. Two effects are at play when moving from retail price maintenance to quantity forcing. First, restricting screening possibilities may increase retailers' rent. Second, such a restriction affects downstream competition. This latter effect may justify using quantity forcing contracts and, more generally, shed light on a novel source of contractual incompleteness.

Date: 2010-02
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Citations: View citations in EconPapers (19)

Published in American Economic Journal: Microeconomics, 2010, 2 (1), pp.204-229. ⟨10.1257/mic.2.1.204⟩

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Journal Article: The Strategic Value of Quantity Forcing Contracts (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00754478

DOI: 10.1257/mic.2.1.204

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