The investigator intends to extend the investigation of the principal-agent model in the context of oligopolistic firms that contract with retailers. The retailers provide services to the (oligopolist) firm in the form of advertising, maintenance or the provision of warranties. Because the firm cannot observe the level of effort that the retailer expends, nor does the firm have direct access to information about demand and retailing cost, the problems of moral hazard and adverse selection can be studied. Some important questions in industrial organization are studied in the context of this model. Specifically, it will look at how the form of competition among retailers affects: the willingness of the firms to delegate decisions to the retailers, the incentives of firms to monitor their agents, the marketing efforts of agents and the profits of firms and retailers. In the context of this same model, the issue of vertical restraints are analyzed. The study will see how the restraint selected depends upon the degree of differentiation among products, the relative efficiency of retailers and firms, and the relative precision of the information known only to the retailers.
