Delegated Management In Dynamic Duopolies
AbstractThis paper studies the commitment value of delegation in a model of dynamic competition. We argue that separating ownership and control delivers an instantaneous first-mover advantage. Thus, delegation would enable an oligopolistic firm to increase its equilibrium profit relative to direct management. We focus on remuneration strategies that provide managers with intertemporal production incentives: future wages depend on current effort. Their composition and functional form are endogenously determined by the requirement for Markov perfection. For the case of linear-quadratic payoffs, we obtain a closed-form solution for the equilibrium wage strategies which is independent of industry structure.
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Bibliographic InfoArticle provided by World Scientific Publishing Co. Pte. Ltd. in its journal International Game Theory Review.
Volume (Year): 12 (2010)
Issue (Month): 02 ()
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Web page: http://www.worldscinet.com/igtr/igtr.shtml
Find related papers by JEL classification:
- B4 - Schools of Economic Thought and Methodology - - Economic Methodology
- C0 - Mathematical and Quantitative Methods - - General
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- D5 - Microeconomics - - General Equilibrium and Disequilibrium
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