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)
Martimort, David, and Salvatore Piccolo.
"The Strategic Value of Quantity Forcing Contracts."
American Economic Journal: Microeconomics,
Asymmetric and Private Information
Economics of Contract: Theory
Transactional Relationships; Contracts and Reputation; Networks