Complementary Monopolies with asymmetric information

• Type: Article in International Scientific Journal
• Date: 2020

Authors

Laussel, D (Author) Other; Joana Resende (Author) FEP

Journal

Title: Economic Theory

Vol. 70 No. 4

Pages: 943-981

ISSN: 0938-2259

Publisher: Springer Nature

Indexing

ISI Web of Knowledge - 7 Citations

Scopus - 8 Citations

Other information

Authenticus ID: P-00Q-ME7

DOI: 10.1007/s00199-019-01197-5

Abstract (EN): We investigate how asymmetric information on final demand affects strategic interaction between a downstream monopolist and a set of upstream monopolists, who independently produce complementary inputs. We study an intrinsic private common agency game in which each supplier i independently proposes a pricing schedule contract to the assembler, specifying the supplier¿s payment as a function of the assembler¿s purchase of input i. We provide a necessary and sufficient equilibrium condition. A lot of equilibria satisfy this condition but there is a unique Pareto-undominated Nash equilibrium from the suppliers¿ point of view. In this equilibrium, there are unavoidable efficiency losses due to excessively low sales of the good. However, suppliers may be able to limit these distortions by implicitly coordinating on an equilibrium with a rigid (positive) output in bad demand circumstances. © 2019, Springer-Verlag GmbH Germany, part of Springer Nature.

Language: English

Type (Professor's evaluation): Scientific