Economics, Econometrics and Finance
4 years ago

Firms Suffer When Trying to Avoid Exploitation by Suppliers

RePEc: Research Papers in Economics
Solving a hold-up problem may harm all firms: downstream R&D and transport-price contracts
Kazuhiro Takauchi, Tomomichi Mizuno

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Raising input prices after downstream research can harm all firms by reducing outputs and demand. Fixed-price contracts can help in some cases, but in the transport industry, they can actually make all firms worse off due to increased competition.