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American Economic Journal: Microeconomics: Vol. 2 No. 1 (February 2010)
AEJ: Micro Volume. 2, Issue 1 | 
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AEJ: Micro Forthcoming Articles
The Strategic Value of Quantity Forcing Contracts
Article Citation
Martimort, David, and
Salvatore Piccolo. 2010. "The Strategic Value of Quantity Forcing Contracts."
American Economic Journal: Microeconomics,
2(1): 204-29.
DOI: 10.1257/mic.2.1.204
DOI: 10.1257/mic.2.1.204
Abstract
We explore the strategic value of quantity forcing contracts in a
manufacturer-retailer environment under both adverse selection
and moral hazard. Manufacturers dealing with (exclusive) competing
retailers may prefer to leave contracts silent on retail prices,
whenever other aspects of the retailers' activity remain nonverifiable.
Two effects are at play when moving from retail price maintenance
to quantity forcing. First, restricting screening possibilities
may increase retailers' rent. Second, such a restriction affects downstream
competition. This latter effect may justify using quantity
forcing contracts and, more generally, shed light on a novel source
of contractual incompleteness. (JEL D82, D86, L14)
Article Full-Text Access
Full-text Article
Authors
Martimort, David (Toulouse School of Economics and EHESS)
Piccolo, Salvatore (U Naples "Federico II" and CSEF)
Piccolo, Salvatore (U Naples "Federico II" and CSEF)
JEL Classifications
D82: Asymmetric and Private Information
D86: Economics of Contract: Theory
L14: Transactional Relationships; Contracts and Reputation; Networks
D86: Economics of Contract: Theory
L14: Transactional Relationships; Contracts and Reputation; Networks
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