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Competition and Cooperation within a Multidivisional Firm

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  • Fauli-Oller, Ramon
  • Giralt, Magdalena
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    Abstract

    The strategic choice of managerial incentives is studied in a multiagent setting using a two-stage game. In the first stage, the principal chooses incentive schemes. Then, agents make their decisions. The game models the structure of multidivisional firms; divisions (agents) are managed independently but the general office (principal) monitors their performance and provides incentives. It explains the rationale for establishing either cooperation or competition across divisions if firms face Cournot competition. If divisions are linked because of technological reasons (positive spillovers), cooperation should be stimulated. If they sell substitute products (negative spillovers), competition is needed. Copyright 1995 by Blackwell Publishing Ltd.

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    Bibliographic Info

    Article provided by Wiley Blackwell in its journal Journal of Industrial Economics.

    Volume (Year): 43 (1995)
    Issue (Month): 1 (March)
    Pages: 77-99

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    Handle: RePEc:bla:jindec:v:43:y:1995:i:1:p:77-99

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    Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-1821

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    Cited by:
    1. Vives, Xavier, 2008. "Strategic supply function competition with private information," IESE Research Papers D/774, IESE Business School.
    2. Dan Li & Manuel Portugal Ferreira & Fernando Serra, 2007. "Technology transfer within MNEs: An investigation of inter-subsidiary competition and cooperation," Working Papers, globADVANTAGE, Polytechnic Institute of Leiria 1, globADVANTAGE, Polytechnic Institute of Leiria.
    3. Sue Mialon, 2005. "Efficient Horizontal Mergers: The Effects of Internal Capital Reallocation and Organizational Form," Emory Economics, Department of Economics, Emory University (Atlanta) 0522, Department of Economics, Emory University (Atlanta).
    4. Michel Cavagnac, 2005. "Strategic managerial incentives under adverse selection," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 26(8), pages 499-512.

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