Complementary Monopolies with asymmetric information

Laussel, Didier; Resende, Joana

doi:10.1007/s00199-019-01197-5

Cited by 9 publications

(3 citation statements)

References 28 publications

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“…A key conclusion is that two-part (non-linear) contracts are more efficient than linear ones. 14 In a different framework with one downstream firm and a set of upstream (non-integrated) monopolists producing complementary inputs, Laussel and Resende (2020) conclude that whereas in a complete information setup, nonlinear pricing strategies like two-part tariffs can achieve maximum industry profit, this is no longer the case with asymmetric information. Foros et al (2021) consider vertical separation, downstream Cournot and secret contracts, and show that in some cases the supplier and downstream firms have conflicting interests with respect to their preferred contract type, whereas in other cases both the supplier and downstream firms are better off with linear tariffs.…”

Section: Related Literaturementioning

confidence: 99%

Vertical contracting between a vertically integrated firm and a downstream rival

Kourandi,

Pinopoulos

2023

Econ Theory

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Compared to linear tariffs, two-part tariffs are generally perceived as being more efficient since double marginalization is avoided. We investigate the efficiency of two-part tariffs vs. linear tariffs when a vertically integrated firm sells its input also to an independent downstream firm selling a differentiated substitute product. We find that a linear tariff can generate higher consumer surplus and overall welfare than a two-part tariff when the independent downstream firm is rather powerful in negotiating the contract terms, and downstream competition is in prices (Bertrand competition). In that case, the integrated firm makes more profits under a linear tariff than under a two-part tariff. In contrast, under downstream Cournot competition two-part tariffs are always welfare-superior. Under linear demand, we find that, irrespective of the mode of downstream competition and the distribution of bargaining power, the preferred contract type of the integrated firm is always welfare-superior.

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Section: Related Literaturementioning

confidence: 99%

Vertical contracting between a vertically integrated firm and a downstream rival

Kourandi,

Pinopoulos

2023

Econ Theory

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“…probability weighting function that reproduces estimates existing in the literature (e.g., Werner and Zank 2019;Lleras et al 2019). Laussel and Resende (2020) investigate how asymmetric information on final demand affects strategic interaction between a downstream monopolist and a number of upstream monopolists, who independently produce complementary inputs. This is modeled as an intrinsic private common agency game in which each supplier independently proposes a pricing schedule contract to the assembler, specifying the supplier's payment as a function of the assembler's purchase of its input.…”

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confidence: 94%

Special Issue: Supermodularity and Monotonicity in Economics

Amir

2020

Econ Theory

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This Special issue is composed of eight separate papers, each using the general methodology of supermodular games (such as Topkis's Theorem on monotone comparative statics, Topkis 1998) and/or monotone methods (such as Tarski's fixed point theorem). The topics of the papers lie in quite diversified areas of pure and applied economic theory, including the foundations of risk and uncertainty, principal-agent theory, Markov stopping games, recursive games, games with individually monotonic best responses, potential games, and oligopoly theory with and without network effects. In what follows, we provide a brief introduction to each of the papers, in the order in which they appear in the Special Issue, along with some brief remarks on their respective related literature. Gollier (2020) defines a notion of regret-risk aversion by requiring that the regretrisk-averse individual never choose the lottery that generates the larger risk of regret in a menu in which two lotteries have the same distribution of payoffs, with one generating a larger risk of regret in the sense of Rothschild-Stiglitz. It turns out that this notion is intimately connected to the concept of comparative concordance as introduced in economics by Epstein and Tanny (1980) and Tchen (1980); also see Amir and Lazzati (2016). The main result establishes that an individual is regret-risk-averse (-loving) if and only if her bivariate utility function is supermodular (submodular), i.e., has a positive (negative) cross partial derivative. We define regret-risk aversion in the small and in the large. We also show that regret-risk aversion tends to induce a bias in favor of the risky act in any one-risky-one-safe menu, in particular when the payoff of the risky choice is highly positively skewed. This is compatible with the "possibility effect" from prospect theory. Symmetrically, the aversion to rejoicing-risk can prevail when ex post utility is sensitive to the forgone worst payoff. Rejoicing-risk-seeking is compatible with the "certainty effect". Finally regret-risk-averse and rejoicing-riskseeking people behave as if they had rank-dependent utility with an inverseS shaped B Rabah Amir

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“…Plassmann et al (2011) conducted a survey of the literature on the holdout problem and some remedial solutions in the context of the land assembly problem. Laussel and Resende (2020) discuss the holdout problem in the context of complementary monopolies in the vertical value chain.…”

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confidence: 99%

Double auction for trading perfect complements

Chaturvedi,

Pandey

2023

J Public Economic Theory

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For a trading problem where a buyer is interested in an aggregate resource with fragmented ownership, the individually owned resources are perfect complements in trade. A double auction, chosen in accordance with a value alignment principle which we formulate, is shown to be strategy proof for owners. Since it also values the aggregate resource correctly, it mitigates the holdout problem by changing the source of inefficiency from complementarity on owners' side to lack of competition on buyer side. The value alignment principle implies that this double auction has a majority trading rule. With multiple buyers, a suitable modification makes the double auction strategy proof even for the buyers, thus mitigating the holdout problem by achieving approximate ex post efficiency when the number of owners is large.

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Complementary Monopolies with asymmetric information

Cited by 9 publications

References 28 publications

Vertical contracting between a vertically integrated firm and a downstream rival

Vertical contracting between a vertically integrated firm and a downstream rival

Special Issue: Supermodularity and Monotonicity in Economics

Double auction for trading perfect complements

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