Do firms' owners delegate both short-run and long-run decisions to their managers in equilibrium?
AbstractThe present paper explores the scope of strategic delegation, to the firms' R&D investments and market competition in a Cournot Oligopoly. The firms' owners' have two alternative strategies: either the Full Delegation (FD) one, in which firms' owners delegate both short-run and long-run decisions to their managers, or the Partial Delegation (PD) one, in which firms' owners delegate only short-run decisions to their managers. We investigate which delegation strategy will emerge in equilibrium, under the assumption that there is no credible commitment between the firms' owners over the strategy they will select. We find that the Universal Partial Delegation is never an equilibrium configuration. If the initial unit cost is relatively high (low), the Universal Full Delegation (Coexistence) configuration is the only endogenously emerging equilibrium. However, the above results are sensitive to the existence of the commitment assumption.
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Bibliographic InfoPaper provided by University of Crete, Department of Economics in its series Working Papers with number 0815.
Date of creation: 17 Jun 2008
Date of revision:
Strategic Delegation; Oligopoly; R&D Investments; Equilibrium Delegation Schemes.;
Find related papers by JEL classification:
- C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-06-21 (All new papers)
- NEP-BEC-2008-06-21 (Business Economics)
- NEP-IPR-2008-06-21 (Intellectual Property Rights)
- NEP-MIC-2008-06-21 (Microeconomics)
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