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A Note On Endogenous Timing With Strategic Delegation: Unilateral Externality Case

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  • Kangsik Choi
  • Yuanzhu Lu

Abstract

We investigated the endogenous choice of roles by managerial firms in the presence of unilateral externality. The choice over timing can be taken either by managers or by owners. It is shown that (i) the choice of the timing by managers entails the same profit that owners would have achieved by specifying the timing in the delegation contract; and (ii) firms move simultaneously if the degree of unilateral externality is small, while sequentially if the degree of unilateral externality is large, with the firm generating unilateral externality as a follower; the owner of the follower firm delegates to restrict output, while his/her counterpart does not delegate it.

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File URL: http://hdl.handle.net/10.1111/j.1467-8586.2011.00392.x
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Bibliographic Info

Article provided by Wiley Blackwell in its journal Bulletin of Economic Research.

Volume (Year): 64 (2012)
Issue (Month): 2 (04)
Pages: 253-264

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Handle: RePEc:bla:buecrs:v:64:y:2012:i:2:p:253-264

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  1. Robson, Arthur J, 1990. "Duopoly with Endogenous Strategic Timing: Stackelberg Regained," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(2), pages 263-74, May.
  2. Hamilton, Jonathan H. & Slutsky, Steven M., 1990. "Endogenous timing in duopoly games: Stackelberg or cournot equilibria," Games and Economic Behavior, Elsevier, vol. 2(1), pages 29-46, March.
  3. Barcena-Ruiz, Juan Carlos & Casado-Izaga, F. Javier, 2005. "Should shareholders delegate location decisions?," Research in Economics, Elsevier, vol. 59(3), pages 209-222, September.
  4. Amir, Rabah & Grilo, Isabel, 1999. "Stackelberg versus Cournot Equilibrium," Games and Economic Behavior, Elsevier, vol. 26(1), pages 1-21, January.
  5. Bernd Theilen, 2007. "Delegation and Information Sharing in Cournot Duopoly," Journal of Economics, Springer, vol. 92(1), pages 21-50, September.
  6. Amir Rabah, 1995. "Endogenous Timing in Two-Player Games: A Counterexample," Games and Economic Behavior, Elsevier, vol. 9(2), pages 234-237, May.
  7. Constantine Manasakis & Evangelos Mitrokostas & Emmanuel Petrakis, 2007. "Endogenous Strategic Managerial Incentive Contracts," Working Papers 0706, University of Crete, Department of Economics.
  8. Evangelos Mitrokostas & Emmanuel Petrakis, 2008. "Do firms' owners delegate both short-run and long-run decisions to their managers in equilibrium?," Working Papers 0815, University of Crete, Department of Economics.
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