Vertical contracts in search mar

Janssen, M. C. (2019). Vertical contracts in search markets. International Journal of Industrial Organization.

Abstract

• This paper studies the impact of consumer search on wholesale contracts in a supply chain structure.

Conclusion

• with and without consumer search.
• two different contracts: two-part tariffs, linear wholesale price.
• two types of beliefs: passive or symmetric.
• The vertical contracting literature cannot simply ignore search costs by saying that they are probably small and can therefore be neglected.

Model

• one manufacturer and two retailers.
• passive beliefs: the rival retailer has been offered the equilibrium contract.