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Strategic delegation in oligopolistic tournaments

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  • Matthias Kräkel

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Abstract

This paper considers a two-stage game with two owners and two managers. At the first stage, the owners choose a linear combination of profits and sales as incentives for their managers. At the second stage, the two managers compete in an oligopolistic tournament against each other. The findings substantially differ from the results for Cournot or Bertrand oligopoly: There exist asymmetric equilibria where one owner puts a positive weight on sales and the other a negative one, although the structure of the game is completely symmetric. If the influence of noise vanishes, the owner of the more aggressive firm will even induce sales maximization to his manager in order to preempt his competitor. Copyright Springer-Verlag Berlin/Heidelberg 2005

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File URL: http://hdl.handle.net/10.1007/s10058-005-0136-8
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Bibliographic Info

Article provided by Springer in its journal Review of Economic Design.

Volume (Year): 9 (2005)
Issue (Month): 4 (December)
Pages: 377-396

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Handle: RePEc:spr:reecde:v:9:y:2005:i:4:p:377-396

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Related research

Keywords: Managerial incentives; oligopoly; strategic delegation; tournaments;

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Cited by:
  1. Haldun Evrenk & E. Zenginobuz, 2010. "Regulation through a revenue contest," Journal of Economics, Springer, vol. 99(3), pages 211-237, April.
  2. Kopel, Michael & Brand, Björn, 2012. "Socially responsible firms and endogenous choice of strategic incentives," Economic Modelling, Elsevier, vol. 29(3), pages 982-989.
  3. Werner Güth & Kerstin Pull & Manfred Stadler, 2011. "Intrafirm Conflicts and Interfirm Price Competition," Jena Economic Research Papers 2011-042, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  4. Jost, Peter-J., 2011. "Joint ventures in patent contests with spillovers and the role of strategic budgeting," Journal of Economics and Business, Elsevier, vol. 63(6), pages 605-637.
  5. Güth, Werner & Pull, Kerstin & Stadler, Manfred, 2012. "Strategic delegation in price competition," University of Tuebingen Working Papers in Economics and Finance 43, University of Tuebingen, Faculty of Economics and Social Sciences.
  6. Ahmed Ennasri, 2010. "Incitations Managériales et Concurrence : Synthèse de la Littérature," Studies and Syntheses 10-03, LAMETA, Universtiy of Montpellier, revised Oct 2010.

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