‘How buybacks eliminate opportunism in vertical contracting’
November 21, 2013 Leave a comment
At this week’s CCP seminar on Friday 22nd November, we are delighted to welcome Joao Montez (London Business School) who will be explaining ‘How buybacks eliminate opportunism in vertical contracting‘. An abstract for his paper can be found below.
A monopolist producer, offering private contracts to competing retailers, may be unable to exercise its monopoly power because of the scope for opportunistic behavior. In this paper we show that the producer eliminates this problem using bilateral contracts with buybacks, together with a price ceiling if needed (buybacks are a price paid by the producer to the retailer for each unit of unsold stock). Contracts with buybacks alone can be sufficient to solve the problem if either the elasticity of demand (at the monopoly price) is not too small or the number of retailers is large.
The seminar takes place from 13:00-14:00 in the Thomas Paine Study Centre, Room 1.4.