Journal Article

Informational Alliances

David P. Baron and David Besanko

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 66, issue 4, pages 743-768
Published in print October 1999 | ISSN: 0034-6527
Published online October 1999 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1111/1467-937X.00107
Informational Alliances

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An informational alliance involves the consolidation of the private information of independent suppliers in anticipation of a contracting opportunity with a principal. An informational alliance is an intermediate form of organization between the consolidation of information as in a merger and the suppliers remaining separate entities. It can Pareto dominate a merger, independent contracting, and hierarchical contracting, so a principal can benefit by allowing suppliers to organize the supply network. An informational alliance forms at the nexus of internally-verifiable private information. The principal's contracting problem then involves a participation condition with a reservation value that is a function of type.

Journal Article.  0 words. 

Subjects: Economics

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