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On the (non) existence of a price equilibrium in delegation games with relative performance compensation

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  • M. Kopel
  • L. Lambertini

Abstract

We show that Miller and Pazgal.s (2001) model of strategic delegation, in which managerial incentives are based upon relative performance, is affected by a non-existence problem which has impact on the price equilibrium. The undercutting incentives generating this result are indeed similar to those affecting the stability of price cartels.

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File URL: http://www2.dse.unibo.it/wp/WP807.pdf
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Paper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number wp807.

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Date of creation: Jan 2012
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Handle: RePEc:bol:bodewp:wp807

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  1. Miller, Nolan H & Pazgal, Amit I, 2001. "The Equivalence of Price and Quantity Competition with Delegation," RAND Journal of Economics, The RAND Corporation, vol. 32(2), pages 284-301, Summer.
  2. Matthew J. Clayton & Bjorn N. Jorgensen, 2005. "Optimal Cross Holding with Externalities and Strategic Interactions," The Journal of Business, University of Chicago Press, vol. 78(4), pages 1505-1522, July.
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