This paper considers a long-term relationship between two agents who undertake costly actions or investments which produce a joint benefit. Agents have an opportunity to expropriate some of the joint benefit for their own use. The question asked is how to structure the investments and division...

The paper investigates how competition between two multiproduct downstream firms in vertical relationships affects horizontal relationships: competitor collaboration and performance difference. When the upstream market consists of exclusive suppliers, the efficient firm may have incentive for...

A manufacturer contracting secretly with several downstream competitors faces an opportunism problem, preventing it from exerting its market power. In an infinitely repeated game, the opportunism problem can be relaxed. We show that the upstream firm's market power can be restored even further...

Considering a vertical structure with perfectly competitive upstream firms that deliver a homogenous good to a differentiated retail duopoly, we show that upstream fixed costs may help to monopolize the downstream market. We find that downstream prices increase in upstream firms' fixed costs...

Considering a vertical structure with perfectly competitive upstream firms that deliver a homogenous good to a differentiated retail duopoly, we show that upstream fixed costs may help to monopolize the downstream market. We find that downstream prices increase in upstream firms' fixed costs...

This article revisits the opportunism problem faced by an upstream monopolist contracting with several retailers over secret agreements, when contracts are linear. We characterize the equilibrium under secret contracts and compare it to that under public contracts in a setting allowing for...

This paper investigates the effects of changes in retail market concentration when input prices are negotiated. Results are derived from a model of bilateral Nash-bargaining between upstream and downstream firms which allows for general forms of demand and retail competition. Whether...

In their seminal article on multilateral vertical contracting, McAfee and Schwartz (1994) argue that nondiscrimination clauses may be ineffective in curbing opportunism and may thus have no bite. This begs the question why nondiscrimination clauses are commonly observed in intermediate-goods...

We argue that common ground - knowledge that is shared and known to be shared - can reduce the need for information flows in coordinating specialized activities within the firm, compared to between firms. Consistent with our predictions, in a sample of procurement relationships in the automobile...

We analyze a vertical structure with an upstream monopoly and two downstream retailers. Demand is uncertain but each retailer receives an informative private signal about the state of the demand. We construct an incentive compatible and ex ante balanced mechanism which induces the retailers to...