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Research Details

Informational Alliances, Review of Economic Studies

Abstract

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 remining 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.

Type

Article

Author(s)

David Baron, David Besanko

Date Published

1999

Citations

Baron, David, and David Besanko. 1999. Informational Alliances. Review of Economic Studies. 66(4): 743-68.

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