We study a model where an endogenous number of competing manufacturers located around a circle contract with exclusive retailers who are privately informed about their costs. The number of brands in the market (determined by the manufacturerszero pro…t condition) depends on the presence of asymmetric information and on the types of contracts between manufacturers and retailers. With two-part tari¤s, wholesale prices fully reect retailers costs; with linear contracts, wholesale prices are constant and independent of retailerscosts. The number of brands is lower (resp. higher) with asymmetric information than with com-plete information when contracts are linear (resp. with two-part tari¤s). Moreover, although the number of brands is always higher with linear contracts than with two-part tari¤s, joint pro ts of manufacturers and retailers are higher with linear prices. We also discuss manu-facturersincentives to choose di¤erent contract forms and analyze the e¤ects of endogenous entry on welfare.

We revisit the choice of product differentiation in theHotellingmodel, by assuming that competing firms are vertically separated, and that retailers choose products ’ characteristics. The “principle of differentiation ” does not hold because retailers with private information about their marginal costs produce less differentiated products in order to increase their information rents. Hence, information asymmetry within vertical hierarchies may increase social welfare by inducing them to sell products that appeal to a larger number of consumers. We show that the socially optimal level of transparency between manufacturers and retailers depends on the weight assigned to consumers ’ surplus and trades off two effects: higher transparency reduces price distortion but induces retailers to produce excessively similar products. 1.

Die ZBW räumt Ihnen als Nutzerin/Nutzer das unentgeltliche, räumlich unbeschränkte und zeitlich auf die Dauer des Schutzrechts beschränkte einfache Recht ein, das ausgewählte Werk im Rahmen der unter