|
on Contract Theory and Applications |
| By: | Tsuritani, Ryosuke |
| Abstract: | In a vertical market, the price of the final good is high if a seller has strong bargaining power. Thus, a policy that strengthens the bargaining power of sub-suppliers may be desirable from a fairness perspective while undesirable from an efficiency perspective. We consider a vertical market with one sub-supplier, focal supplier, and manufacturer. The focal supplier purchases inputs from the sub-supplier and sells its products to the manufacturer. Suppliers' selling prices are determined through Nash bargaining. We find that although suppliers' vertical separation induces triple-markup inefficiency in vertical relations, if the focal supplier has weak bargaining power over the manufacturer or strong bargaining power over the sub-supplier, the suppliers have the incentive to remain separated. This is because suppliers' vertical separation may be a price-increasing commitment and transfer the bargaining surplus from the manufacturer to the suppliers. Therefore, a policy that strengthens the bargaining power of sub-suppliers may also be justified from an efficiency perspective because it may encourage vertical integration. |
| Keywords: | Vertical market; Vertical integration; Three-tier supply chain; Bargaining; Subcontracting Act |
| JEL: | D42 L23 L40 |
| Date: | 2024–09–15 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122071 |
| By: | Andrzej Baranski; Sumit Goel |
| Abstract: | We study the classical contest design problem of allocating a budget across different prizes to maximize effort in a finite type-space environment. For any contest, we characterize the unique symmetric equilibrium. In this equilibrium, different agent types mix over contiguous intervals so that more efficient agents always exert greater effort than less efficient agents. We then solve for the expected equilibrium effort, and identify conditions under which the effect of increasing competition under linear costs is informative about the effect of such a transformation under general costs. As a result, we find that the winner-takes-all contest is optimal under linear and concave costs. Lastly, we obtain an equilibrium convergence result for the continuum type-space, and since the finite type-space encompasses the complete information environment as a special case, our analysis offers a unified approach to studying contests in these classical environments. |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2410.04970 |
| By: | Neil A. Chriss |
| Abstract: | This paper develops a mathematical framework for building a position in a stock over a fixed period of time while in competition with one or more other traders doing the same thing. We develop a game-theoretic framework that takes place in the space of trading strategies where action sets are trading strategies and traders try to devise best-response strategies to their adversaries. In this setup trading is guided by a desire to minimize the total cost of trading arising from a mixture of temporary and permanent market impact caused by the aggregate level of trading including the trader and the competition. We describe a notion of equilibrium strategies, show that they exist and provide closed-form solutions. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2409.03586 |