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Incomplete Contracts as a Screening Device in Competing Vertical Intra-firm Relationships
| Content Provider | Semantic Scholar |
|---|---|
| Author | Sicoli, Marta Sorge, Marco |
| Copyright Year | 2012 |
| Abstract | Recent research in industrial organization has emphasized the strategic value of incomplete contracts in vertical intra-firm relationships. This paper offers a screening rationale for contractual incompleteness in a class of producer-retailer economies under adverse selection and moral hazard. By means of a simple two-type agency model, we show that, when the agent (retailer) operates in an imperfectly competitive market, the principal (producer) may deliberately choose to exploit incomplete contracts to warrant truthful revelation of the retailer’s private information. While the contractual provision of monitoring instruments to prevent agent’s misbehavior may well fail to induce self-selection, equilibria with full separation always exist under incomplete contracts even in the presence of misreporting incentives for both unobservable types. |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | http://www.siepweb.it/siep/oldDoc/2012/201251.pdf |
| Language | English |
| Access Restriction | Open |
| Subject Keyword | Contract agreement Design rationale Instrument - device Moral hazard Partial Personally identifiable information Transaction counts and value totals - contract Virtual screening |
| Content Type | Text |
| Resource Type | Article |
