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Decisions of Duopoly Firms on Sharing Information on Their Delegation Contracts

Author

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  • Kyung Hwan Baik

    (Sungkyunkwan University)

  • Dongryul Lee

    (Sungshin University)

Abstract

We study duopolies in which firms—each of which consists of an owner and a manager—have the option of releasing or not to the public their contract information between the owner and the manager. The owner of each firm seeks to maximize her firm’s profits, and designs a compensation scheme for her manager in which the manager’s compensation depends on his performance: a linear combination of the firm’s profits and sales. After accepting contracts, the managers compete in quantities or in prices. As a main result, we show in both quantity-setting and price-setting models that the firms both release their contract information. Then, we compare the outcomes of the observable-contracts case with those of the unobservable-contracts case.

Suggested Citation

  • Kyung Hwan Baik & Dongryul Lee, 2020. "Decisions of Duopoly Firms on Sharing Information on Their Delegation Contracts," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 57(1), pages 145-165, August.
    • Handle: RePEc:kap:revind:v:57:y:2020:i:1:d:10.1007_s11151-019-09732-3
    DOI: 10.1007/s11151-019-09732-3
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Michael Kopel & Eva Maria Putz, 2021. "Information sharing in a Cournot–Bertrand duopoly," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(7), pages 1645-1655, October.
    2. DongJoon Lee & Joonghwa Oh, 2022. "Strategic commitments of downstream investment firms," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 2098-2107, September.
    3. Cong Pan & DongJoon Lee & Kangsik Choi, 2020. "Firms’ strategic delegation with heterogeneous consumers," Journal of Economics, Springer, vol. 131(3), pages 199-221, December.
    4. Jumpei Hamamura & Vinay Ramani, 2023. "Social performance versus relative performance evaluation, asymmetric costs, and quantity competition under managerial delegation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(3), pages 1706-1719, April.
    5. Yulia Dzhabarova & Stanimir Kabaivanov & Margarita Ruseva & Boyan Zlatanov, 2020. "Existence, Uniqueness and Stability of Market Equilibrium in Oligopoly Markets," Administrative Sciences, MDPI, vol. 10(3), pages 1-32, September.
    6. Kyung Hwan Baik & Sang-Kee Kim, 2020. "Observable versus unobservable R&D investments in duopolies," Journal of Economics, Springer, vol. 130(1), pages 37-66, June.
    7. Kangsik Choi & DongJoon Lee, 2022. "Network externalities and endogenous timing in managerial firms," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(5), pages 1462-1475, July.
    8. Michael Kopel & Eva Maria Putz, 2021. "Sharing managerial contract information in a vertically related market," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(4), pages 1037-1047, June.

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    More about this item

    Keywords

    Decision on information sharing; Delegation; Contract; Managerial incentives; Duopoly;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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