We analyze a duopoly in which firms acquire inputs through bilateral monopoly relations with suppliers. We combine a bargaining model with a duopoly model to examine how input prices and profits are affected by the structures of the upstream and downstream industries, by the demand relations...

Anecdotal evidence suggests that agents often spend resources distorting information transmitted to principals. We present a model where costly information distortion emerges as equilibrium behavior. The information structure we focus on is intermediate between (and encompasses) the cases of...

The idea that commitment is valuable plays a key role in many economic models. However, Bagwell (1995) has shown that commitment may have no value if there is (even a slight) noise in the observation of the leader's action, thus casting doubt on the notion that commitment has strategic value....

In this article I analyze strategic investment under uncertainty in a new market, where firms face a tradeoff between commitment and flexibility. The model predicts asymmetric equilibria under fairly general conditions, even though firms are ex ante identical and have symmetric opportunities to...

We examine a model of contracting where parties interact repeatedly and can contract at any point in time, but writing formal contracts is costly. A contract can describe the external environment and the parties' behavior in a more or less detailed way, and the cost of writing a contract is...

We present a theory of collusive pricing for markets in which demand alternates stochastically between fast-growth (boom) and slow-growth (recession) phases. We show that (1) the most-collusive prices are weakly procyclical (countercyclical) when demand growth rates are positively (negatively)...

We explore the response of collusive prices to changing demand conditions when firms operate under capacity constraints in the presence of demand uncertainty. We find support for the conventional view that periods of low demand lead, through the emergence of excess capacity, to a breakdown of...