"When Should Manufacturers Want Fair Trade?": New Insights from Asymmetric Information when Supply Chains Compete

Jakub Kastl, David Martimort and Salvatore Piccolo ()

PSE-Ecole d'économie de Paris (Postprint) from HAL

Abstract: We study a model of competing manufacturer/retailer pairs where adverse selection and moral hazard are coupled with promotional externalities at the downstream level. In contrast to earlier models mainly focusing on a bilateral monopoly setting, we show that with competing brands a 'laissez-faire' approach towards vertical price control might not always promote productive efficiency. Giving manufacturers freedom to control retail prices is more likely to harm consumers when retailers impose positive promotional externalities on each other, and the converse is true otherwise. Our simple model also suggests that, with competing supply chains, consumers and manufacturers might prefer different contractual modes if promotional externalities have substantial effects on demands.

Date: 2011-10
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Citations: View citations in EconPapers (6)

Published in Journal of Economics and Management Strategy, 2011, 20 (3), pp.649-677. ⟨10.1111/j.1530-9134.2011.00300.x⟩

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Related works:
Journal Article: “When Should Manufacturers Want Fair Trade?”: New Insights from Asymmetric Information when Supply Chains Compete (2011)
Working Paper: "When Should Manufacturers Want Fair Trade?": New Insights from Asymmetric Information when Supply Chains Compete (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:pseptp:halshs-00754510

DOI: 10.1111/j.1530-9134.2011.00300.x

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