Vertical Contracting with Informational Opportunism

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.
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https://halshs.archives-ouvertes.fr/halshs-01273256
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Submitted on : Friday, February 12, 2016 - 11:01:00 AM
Last modification on : Wednesday, May 22, 2019 - 1:23:42 AM

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Vianney Dequiedt, David Martimort. Vertical Contracting with Informational Opportunism. The American Economic Review, 2015, 105 (7), pp.1-43. ⟨10.1257/aer.20121640⟩. ⟨halshs-01273256⟩

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