In this paper we characterize the optimal procurement policy for a multiproduct monopoly with multidimensional private information about its costs. We show that, unless correlation between costs is positive and large, the optimal procurement contract should regulate jointly the production of the various goods even when these goods are not linked by any technological or demand factor.The economic intuition behind this resultis similar to the rent-extracting argument used to justify the optimal sellingstrategy of a multiproduct monopolist. In both cases a bundlingstrategy allows the principal to reduce the informational rents of `mixed type' agents when they are more likely. The results arealso applied to the case where, for each good, a verifiable quality as well asa quantity index can be contracted upon.

Optimal Procurement in Multiproduct Monopoly / Brighi, Luigi; D'Amato, M.. - In: STUDI ECONOMICI. - ISSN 0039-2928. - STAMPA. - 65:(1998), pp. 81-104.

Optimal Procurement in Multiproduct Monopoly

BRIGHI, Luigi;
1998-01-01

Abstract

In this paper we characterize the optimal procurement policy for a multiproduct monopoly with multidimensional private information about its costs. We show that, unless correlation between costs is positive and large, the optimal procurement contract should regulate jointly the production of the various goods even when these goods are not linked by any technological or demand factor.The economic intuition behind this resultis similar to the rent-extracting argument used to justify the optimal sellingstrategy of a multiproduct monopolist. In both cases a bundlingstrategy allows the principal to reduce the informational rents of `mixed type' agents when they are more likely. The results arealso applied to the case where, for each good, a verifiable quality as well asa quantity index can be contracted upon.
65
81
104
Optimal Procurement in Multiproduct Monopoly / Brighi, Luigi; D'Amato, M.. - In: STUDI ECONOMICI. - ISSN 0039-2928. - STAMPA. - 65:(1998), pp. 81-104.
Brighi, Luigi; D'Amato, M.
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11380/448714
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