Working paper

Secret contracting in multilateral relations

Patrick Rey, and T. Verge


We develop a general, tractable framework of multilateral vertical contracting, which places no restriction on tari§s and fully accounts for their impact on downstream competition. Equilibrium tariffs are cost-based and replicate the outcome of a multi-brand oligopoly, a finding in line with the analysis of a recent merger. We provide a micro-foundation for this framework, before analyzing the effect of RPM and price parity provisions, and of resale vs. agency business models. Finally, we extend the framework to endogenize the distribution network; we also consider mergers and show that their impact on the distribution network can dominate price effects


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


Patrick Rey, and T. Verge, Secret contracting in multilateral relations, TSE Working Paper, n. 16-744, December 2016, revised December 2020.

Published in

TSE Working Paper, n. 16-744, December 2016, revised December 2020