Vertical Contracting with Informational Opportunism

Vianney Dequiedt () and David Martimort
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Vianney Dequiedt: CERDI - Centre d'Études et de Recherches sur le Développement International - UCA [2017-2020] - Université Clermont Auvergne [2017-2020] - CNRS - Centre National de la Recherche Scientifique

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Abstract: We consider vertical contracting arrangements between a manufacturer and a retailing network when retailers have private information and the organization is run through bilateral contracts. We highlight a new form of informational opportunism arising when the manufacturer manipulates information learned separately in each relationship. We characterize the set of allocations robust to such opportunism by means of simple ex post incentive compatibility constraints. Those constraints limit the manufacturer's ability to use yardstick competition among retailers. They simplify contracts and restore a rent/efficiency trade-off even with correlated information. We show that sell-out contracts are optimal under a wide range of circumstances.

Keywords: cerdi (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (11)

Published in The American Economic Review, 2015, 105 (7), pp.1-43. ⟨10.1257/aer.20121640⟩

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Journal Article: Vertical Contracting with Informational Opportunism (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-01273256

DOI: 10.1257/aer.20121640

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