Seminarios académicos y conferencias
"Information Exchange through Secret Vertical Contracts"
Coautoreado con Jihwan Do
20 Octubre 2020 - 17:00 hrs.
Abstract: Can downstream firms exchange their private demand forecasts through secret vertical contracts? This paper provides a positive answer to this question. We study a common agency problem where two downstream firms, who privately receive demand signals about a common demand state, simultaneously offer a secret menu of two-part tariffs contracts to their common supplier. Upon accepting a particular contract, each downstream firm may learn the other firm’s demand signal, which allows them to set a more efficient quantity level. When the downstream firms operate in separated markets, we show that a perfect Bayesian equilibrium exists in which information is fully transmitted, and downstream firms extract nearly first-best industry profit. When firms compete, we show that private information implies that downstream firms’ payoffs are bounded away from the first-best industry profit, creating an inefficiency. Implications of our findings on antitrust policies are also discussed.