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R&D spillovers and strategic delegation in oligopolistic contests

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  • Matthias Kräkel

    (Department of Economics, BWL II, University of Bonn, Adenauerallee 24-42, Bonn D-53113, Germany)

Abstract

Considering oligopolistic contests with R&D spillovers and strategic delegation three results can be obtained: (1) There exist multiple asymmetric equilibria where one owner highly favors sales as a basis for his manager's incentives which drives the other firm out of the market. (2) If R&D spillovers are zero, a managerial firm will have a strong strategic advantage when competing with an entrepreneurial firm. If both owners endogenously decide about delegation, each owner's dominant strategy will be to delegate, given that the manager's reservation value is not too large. (3) If R&D spillovers are maximal, collusive market outcomes become very likely, which makes strategic delegation less important. Copyright © 2004 John Wiley & Sons, Ltd.

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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

Volume (Year): 25 (2004)
Issue (Month): 3 ()
Pages: 147-156

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Handle: RePEc:wly:mgtdec:v:25:y:2004:i:3:p:147-156

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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References

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  1. Huck, Steffen & Konrad, Kai A. & Müller, Wieland, 2000. "Divisionalization in contests," SFB 373 Discussion Papers 2000,9, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  2. Fershtman, C. & Kalai, E., 1993. "Unobserved Delegation," Papers 10-93, Tel Aviv - the Sackler Institute of Economic Studies.
    • Fershtman, Chaim & Kalai, Ehud, 1997. "Unobserved Delegation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(4), pages 763-74, November.
  3. Gil S. Epstein & Carsten Hefeker, 2003. "Lobbying contests with alternative instruments," Economics of Governance, Springer, vol. 4(1), pages 81-89, 04.
  4. Fershtman, Chaim, 1985. "Managerial incentives as a strategic variable in duopolistic environment," International Journal of Industrial Organization, Elsevier, vol. 3(2), pages 245-253, June.
  5. Kyung Hwan Baik, 1994. "Winner-Help-Loser Group Formation In Rent-Seeking Contests," Economics and Politics, Wiley Blackwell, vol. 6(2), pages 147-162, 07.
  6. Bagwell, Kyle, 1995. "Commitment and observability in games," Games and Economic Behavior, Elsevier, vol. 8(2), pages 271-280.
  7. Kai A. Konrad & Wolfgang Peters & Karl Wärneryd, 2004. "Delegation in first-price all-pay auctions," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 25(5), pages 283-290.
  8. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384, December.
  9. Schmalensee, Richard, 1976. "A Model of Promotional Competition in Oligopoly," Review of Economic Studies, Wiley Blackwell, vol. 43(3), pages 493-507, October.
  10. Vickers, John, 1985. "Delegation and the Theory of the Firm," Economic Journal, Royal Economic Society, vol. 95(380a), pages 138-47, Supplemen.
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Cited by:
  1. Florian Englmaier, 2010. "Managerial optimism and investment choice," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(4), pages 303-310.
  2. R. Cellini & L. Lambertini & A. Sterlacchini, 2009. "Managerial incentive and the firms' propensity to invest in product and process innovation," Working Papers 655, Dipartimento Scienze Economiche, Universita' di Bologna.
  3. Chowdhury, Subhasish & Sheremeta, Roman, 2014. "Strategically Equivalent Contests," MPRA Paper 55450, University Library of Munich, Germany.
  4. Rupayan Pal, 2012. "Delegation And Emission Tax In A Differentiated Oligopoly," Manchester School, University of Manchester, vol. 80(6), pages 650-670, December.
  5. Michael Kopel & Clemens Löffler, 2008. "Commitment, first-mover-, and second-mover advantage," Journal of Economics, Springer, vol. 94(2), pages 143-166, July.
  6. Johannes Münster, 2007. "Contests with investment," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(8), pages 849-862.
  7. Rupayan Pal, 2009. "Delegation and Emission Tax in a Differentiated Oligopoly," Working Papers id:2263, eSocialSciences.

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