Controlling opportunism in vertical contracting when production precedes sales

2015 ◽  
Vol 46 (3) ◽  
pp. 650-670 ◽  
Author(s):  
João Montez
Keyword(s):  
Vertical Contracting

scholarly journals Stackelberg equilibria in a continuous-time vertical contracting model with uncertain demand and delayed information

2014 ◽  
Vol 51 (A) ◽  
pp. 213-226 ◽  
Author(s):  
Bernt Øksendal ◽  
Leif Sandal ◽  
Jan Ubøe
Keyword(s):  
Continuous Time ◽  
Variable Coefficients ◽  
Uncertain Demand ◽  
Uhlenbeck Process ◽  
Delayed Information ◽  
Equilibrium Prices ◽  
Special Cases ◽  
Explicit Formulae ◽  
Contracting Model ◽  
Vertical Contracting

We consider explicit formulae for equilibrium prices in a continuous-time vertical contracting model. A manufacturer sells goods to a retailer, and the objective of both parties is to maximize expected profits. Demand is an Itô-Lévy process, and to increase realism, information is delayed. We provide complete existence and uniqueness proofs for a series of special cases, including geometric Brownian motion and the Ornstein-Uhlenbeck process, both with time-variable coefficients. Moreover, explicit solution formulae are given, so these results are operational. An interesting finding is that information that is more precise may be a considerable disadvantage for the retailer.

scholarly journals Raising Retailers’ Profits: On Vertical Practices and the Exclusion of Rivals

2014 ◽  
Vol 104 (2) ◽  
pp. 672-686 ◽  
Author(s):  
John Asker ◽  
Heski Bar-Isaac
Keyword(s):  
Policy Implications ◽  
Resale Price Maintenance ◽  
Resale Price ◽  
Price Maintenance ◽  
Vertical Contracting

Resale price maintenance (RPM), slotting fees, loyalty rebates, and other related vertical practices can allow an incumbent manufacturer to transfer profits to retailers. If these retailers were to accommodate entry, upstream competition could lead to lower industry profits and the breakdown of these profit transfers. Thus, in equilibrium, retailers can internalize the effect of accommodating entry on the incumbent’s profits. Consequently, if entry requires downstream accommodation, entry can be deterred. We discuss policy implications of this aspect of vertical contracting practices. (JEL L14, L22, L25, L42, L81)

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