In a standard durable goods problem, a monopolist that fully commits to a sequence of output earns higher profits than a monopolist that cannot commit. This well-established result is mitigated when we introduce vertical relations, as full commitment may decrease the sum of retailer and manufacturer profits by exacerbating the detrimental decrease in output that results from double marginalization. In this paper, we show that the manufacturer can earn higher profits with a contract that implements an intermediate level of commitment. We also show that total industry profits may be maximized by decreasing the contract length between manufacturer and retailers, limiting commitment to an intermediate level. In this sense, we show that contract length can counteract the time consistency and double marginalization effects, becoming a strategy that firms may adopt to maximize profits.
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