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  3. Nicolás Riquelme, Universidad de Los Andes

Nicolás Riquelme, Universidad de Los Andes

“Information Exchange through Secret Vertical Contracts”

Coautoreado con Jihwan Do

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.

20 de Octubre de 2020


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