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External bargaining versus internal manipulation: A theory of managerial delegation

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  • Xingtang Wang
  • Leonard F.S. Wang

Abstract

Does the competition mode influence the delegation decisions of the firm owners? By constructing a vertical negotiation game model, we find that under Cournot competition in the downstream market, the downstream firm's owner will not choose delegation, whereas under Bertrand competition, the downstream firm's owner will choose delegation. If the product substitution is relatively large, the adoption of delegation management by the owners of downstream firms under Bertrand competition will bring higher profits. It further shows that compared with the situation of no delegation, delegation management may reverse the social welfare ranking under Bertrand and Cournot competitions.

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  • Xingtang Wang & Leonard F.S. Wang, 2021. "External bargaining versus internal manipulation: A theory of managerial delegation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(1), pages 134-142, January.
    • Handle: RePEc:wly:mgtdec:v:42:y:2021:i:1:p:134-142
    DOI: 10.1002/mde.3218
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    References listed on IDEAS

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    Cited by:

    1. Ismail Saglam, 2023. "Centralized bargaining with pre‐donation in a vertically related industry," Manchester School, University of Manchester, vol. 91(3), pages 233-259, June.
    2. Wang, Xingtang, 2022. "Input price discrimination, pricing contract and social welfare," Mathematical Social Sciences, Elsevier, vol. 119(C), pages 91-96.

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