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Prisoner dilemma in a vertical duopoly with managerial delegation

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  • Stefano Colombo

Abstract

We consider managerial delegation with two firms producing goods of different qualities. We show that both firms choose to delegate in equilibrium, but a prisoner dilemma is not inevitable in the case of Cournot competition. Indeed, when the quality asymmetry is sufficiently large, the profits of the high‐quality firm are greater than in the case of no delegation.

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  • Stefano Colombo, 2022. "Prisoner dilemma in a vertical duopoly with managerial delegation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(5), pages 1476-1481, July.
    • Handle: RePEc:wly:mgtdec:v:43:y:2022:i:5:p:1476-1481
    DOI: 10.1002/mde.3468
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    References listed on IDEAS

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    1. Xingtang Wang, 2023. "Who is more aggressive under vertical product differentiation?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(1), pages 608-618, January.

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