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When should manufacturers want fair trade?: New insights from asymmetric information when supply chains compete (2011)
| Venue: | Journal of Economics & Management Strategy |
| Citations: | 3 - 2 self |
BibTeX
@ARTICLE{Kastl11whenshould,
author = {Jakub Kastl and David Martimort and Salvatore Piccolo and Jim Dana and Markus Reisinger and Jean-Charles Rochet and Bill Rogerson and Jean Tirole and Mike},
title = {When should manufacturers want fair trade?: New insights from asymmetric information when supply chains compete},
journal = {Journal of Economics & Management Strategy},
year = {2011},
pages = {649--677}
}
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Abstract
Abstract We study a model of competing manufacturer/retailer pairs where adverse selection and moral hazard are coupled with promotional externalities at the downstream level. In contrast to earlier models mainly focusing on a bilateral monopoly setting, we show that with competing brands a laissez-faire approach towards vertical price control might not always promote productive efficiency. Giving manufacturers freedom to control retail prices is more likely to harm consumers when retailers impose positive promotional externalities on each other, and the converse is true otherwise. Our simple model also suggests that, with competing supply chains, consumers and manufacturers might prefer different contractual modes if promotional externalities have substantial effects on demands.
