Entry deterrence via renegotiation-proof non-exclusive contracts
نویسندگان
چکیده
We establish the entry-deterring role of vertical contracts in a setting that does not rely on asymmetric information, the exclusivity of the incumbent’s contracts, limits on distribution channels, or restrictions on the ability to renegotiate contracts in case of entry. The optimal contract we describe is a three-part quantity discounting contract that involves the payment of an allowance to the downstream firm and a marginal wholesale price below the incumbent’s marginal cost for sufficiently large quantities.
منابع مشابه
Renegotiation-Proof Contracts in Repeated Agency
Renegotiation-proof contracts are studied in infinitely repeated principalagent contracting. Contracts satisfying a weaker notion of renegotiationproofness always exist. With risk neutrality, efficient full-commitment contracts are renegotiation-proof if the agent’s expected lifetime utility is above a critical level; otherwise or if the agent is risk averse then efficient fullcommitment contra...
متن کاملContracts , Information Persistence , and Renegotiation ∗
This paper studies how renegotiation and information persistence shape long-term contracts in principal-agent relationships. Truthful contracts that are renegotiation-proof, according to a concept tailored to account for persistence in the agent’s type, are characterized by their sensitivity to the reports of the agent. The sensitivity of the optimal renegotiation-proof contract is increasing i...
متن کاملRenegotiation-proof contract in repeated agency
Renegotiation-proof contracts are studied in infinitely repeated principal-agent problem. Contracts satisfying a weaker notion of renegotiation-proofness always exist. The renegotiation-proof value function has a simple characterization: It is the principal’s optimal value function when an appropriate lower bound is placed on the agent’s expected utility. Sufficient conditions are provided for ...
متن کاملRenegotiation and the Dynamics of Contract Design
Besides sunk costs and reputation, long-term contracts are an important form of commitment. In fact, in the imaginary world of Arrow-Debreu there is no room for other forms of commitment than the fully contingent longterm contract. At the risk of oversimplification, one could describe a large part of the theoretical research effort of the past three decades as a systematic attempt at understand...
متن کاملA Foundation for Renegotiation-Proof Contracts∗
This paper provides a foundation for renegotiation-proof contracts when the principal has the bargaining power and the agent has private information. In doing so, it extends the analysis of the Coase conjecture to contractual environments in which the seller and the buyer must also determine the quantity or the quality of the good being sold.
متن کامل