The Value of Transparency in Dynamic Contracting with Entry

Gülen Karakoç, Marco Pagnozzi and Salvatore Piccolo ()

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: A manufacturer designs a dynamic contract with a retailer who is privately informed about demand and faces competition by an integrated entrant in a second period. Since the entrant only observes demand after entry and demand is correlated across periods, information about past demand affects the entrant’s production. We analyze the incentives of the incumbent players to share information with the entrant and show that the retailer benefits from transparency, but the manufacturer does not. Contrary to what intuition suggests, transparency with an integrated entrant harms consumers. When the entrant is not an integrated firm, whether transparency benefits consumers depends on the degree of demand persistency.

Keywords: Dynamic Adverse Selection; Entry; Information Sharing; Transparency; Vertical Contracting (search for similar items in EconPapers)
JEL-codes: D40 D82 D83 L11 (search for similar items in EconPapers)
Date: 2017-09-02
New Economics Papers: this item is included in nep-com, nep-cta, nep-ind, nep-mic and nep-reg
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: The value of transparency in dynamic contracting with entry (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:sef:csefwp:482

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