Working paper

Secret contracting in multilateral relations

Patrick Rey, and T. Verge

Abstract

We develop a general but tractable framework of multilateral vertical contracting between upstream and downstream Örms, without any restriction on tari§s, and yet taking into account their impact on downstream competition. In equilibrium, tari§s are cost-based and replicate the outcome of a multi-brand oligopoly, a Önding in line with the analysis of a recent merger. To illustrate its versatility, we use this framework to analyze the e§ect of vertical restraints (resale price maintenance and retail price parity clauses) and of alternative business models (resale vs. agency). Finally, we extend the framework so as to endogenize the market structure.

Keywords

Bilateral contracting; vertical relationships; agency; resale price maintenance; price parity clauses;

JEL codes

  • D43: Oligopoly and Other Forms of Market Imperfection
  • K21: Antitrust Law
  • L13: Oligopoly and Other Imperfect Markets
  • L42: Vertical Restraints • Resale Price Maintenance • Quantity Discounts

See also

Published in

TSE Working Paper, n. 16-744, December 2016, revised July 2017