Posted by Social Science Research Network
Vertical Relations, Opportunism, and Welfare
Germain Gaudin (Heinrich Heine University Dusseldorf)
Abstract: This paper revisits the opportunism problem faced by an upstream monopolist contracting with several retailers over secret agreements, when contracts are linear. We characterize the equilibrium under secret contracts and compare it to that under public ones in a setting which allows for general forms of demand and retail competition. We find that market distortions are more severe under secret contracts than public ones if and only if retailers’ actions are strategic complements. We also investigate the effect of opportunism on firms’ profits. Our main results remain robust whether retailers hold passive or wary beliefs. Finally, we discuss the implications of our results for the antitrust analysis of information exchange between competing retailers, and for the empirical analysis of ‘Nash-in-Nash’ models.
Featured News
T-Mobile Faces Class-Action Lawsuit Over Sprint Merger After Appeal Denied
May 16, 2024 by
CPI
Google Faces Backlash Over Introduction of AI-Generated Summaries in Searches
May 16, 2024 by
CPI
CMA Launches Phase 2 Probe into AlphaTheta’s Acquisition of Serato
May 16, 2024 by
CPI
NFL Executive Escapes Testifying in High-Stakes Trial Over Televised Games
May 16, 2024 by
CPI
EU Consumers Lodge Complaint Against Chinese Retailer Temu Over Content Rules Breach
May 16, 2024 by
CPI
Antitrust Mix by CPI
Antitrust Chronicle® – Ecosystems
May 9, 2024 by
CPI
Mapping Antitrust onto Digital Ecosystems
May 9, 2024 by
CPI
Ecosystems and Competition Law: A Law and Political Economy Approach
May 9, 2024 by
CPI
Ecosystem Theories of Harm: What is Beyond the Buzzword?
May 9, 2024 by
CPI
Open Ecosystems: Benefits, Challenges, and Implications for Antitrust
May 9, 2024 by
CPI