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Observation of Common Retail Cost under Exclusive Dealing

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Authors
Hamada, Kojun
Issue Date
2005
Publisher
Seoul Journal of Economics
Citation
Seoul Journal of Economics 18 (No. 1 2005): 1-20
Keywords
Contract theory; Exclusive dealing; retail cost
Abstract
This paper examines whether the manufacturer should observe the common retail cost when exclusively delegating a retailer to sell her goods. We show that the expected sum of profits between the manufacturer and retailer is greater when the former does not observe the cost ex ante than when they do. However, the manufacturer cannot acquire a greater expected private payoff when not observing the cost, regardless of the optimal contract. Even if the commitment to not observe the cost alleviates competition, the manufacturer must always pay higher information rent than the increasing payoff to the retailer.
ISSN
1225-0279
Language
English
URI
http://hdl.handle.net/10371/1329
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College of Social Sciences (사회과학대학)Institute of Economics Research (경제연구소)Seoul Journal of EconomicsSeoul Journal of Economics vol.18(1) (Spring 2005)
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