Disclosure standards for vertical contracts

In this article, we investigate the welfare consequences of disclosure of vertical contracts. When much of retail competition is among products provided by a dominant supplier, disclosure provides a means through which the supplier can use its prices to coordinate the retail behavior of its wholesale customers. From the retail consumers' perspective, such coordination is unwanted, leading them to favor opacity of contracts. When retail competition is across brands made by different suppliers, disclosure becomes a conduit through which suppliers compete indirectly via their retail surrogates. Consumers welcome the increased competition accompanying such disclosures. In short, the efficacy of disclosure standards depends critically on the suppliers’ market reach and the relative intensity of intrabrand versus interbrand retail competition.