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COMPETING VERTICAL STRUCTURES - PRECOMMITMENT AND RENEGOTIATION

delete1995-05-01
delete60
delete
OA
AI
B
Bernard Caillaud *
B
Bruno Jullien
P
Pierre M. Picard
DOI：10.2307/2171910delete
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Abstract

Abstract

En 中文
We consider a model where two agents, privately informed about their own characteristics, play a (normal form) game on behalf of two uninformed principals. We analyze the existence of precommitment effects through public announcements of contracts, in a model where agency contracts, designed ex-ante, can always be secretly renegotiated, at the ex-ante and interim stages. We show that the existence of precommitment effects depends both on the strategic complementarity of the agents' actions and on the direct effect of the opponents' actions on each principal's welfare. In our model, the possibility of renegotiation is crucial for the existence of precommitment effects. The results are introduced through an example of Cournot and Bertrand competition between firms, viewed as vertical structures.
Keywords:
PRINCIPAL-AGENT THEORY
AGENCY CONTRACTS
RENEGOTIATION
PRECOMMITMENT EFFECTS
STRATEGIC COMPLEMENTARITY
IMPERFECT COMPETITION

Journal

Econometrica cover
Econometrica
IF:
7.1
Papers:
3.0K
Citations:
4.3W

Organization

No organization information available