TY - JOUR
T1 - "When Should Manufacturers Want Fair
Trade?": New Insights from Asymmetric
Information when Supply Chains Compete
AU - Kastl, Jakub
AU - Piccolo, Salvatore
AU - Martimort, David
PY - 2011
Y1 - 2011
N2 - 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.
AB - 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.
KW - Resale Price Maintenance
KW - Resale Price Maintenance
UR - http://hdl.handle.net/10807/31508
U2 - 10.1111/j.1530-9134.2011.00300.x
DO - 10.1111/j.1530-9134.2011.00300.x
M3 - Article
SN - 1058-6407
VL - 20
SP - 649
EP - 677
JO - Journal of Economics and Management Strategy
JF - Journal of Economics and Management Strategy
ER -