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A Note on Endogenous Timing with Strategic Delegation: Unilateral Externality Case

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  • Yuanzhu Lu

    ()
    (China Economics and Management Academy, Central University of Finance and Economics)

  • Kangsik Choi

    ()
    (Graduate School of International Studies, Pusan National University)

Abstract

We investigated the endogenous choice of roles by managerial firms in the presence of unilateral externality. The choice over timing can be taken either by managers or by owners. It is shown that (i) the choice of the timing by managers entails the same profit that owners would have achieved by specifying the timing in the delegation contract; and (ii) firms move simultaneously if the degree of unilateral externality is small, while sequentially if the degree of unilateral externality is large, with the firm generating unilateral externality as a follower; the owner of the follower firm delegates to restrict output, while his/her counterpart does not delegate it.

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Bibliographic Info

Paper provided by China Economics and Management Academy, Central University of Finance and Economics in its series CEMA Working Papers with number 390.

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Length: 16 pages
Date of creation: Mar 2010
Date of revision:
Handle: RePEc:cuf:wpaper:390

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Web page: http://cema.cufe.edu.cn/
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Keywords: Managerial Delegation; Externality; Stackelberg; Endogenous Timing;

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  2. Constantine Manasakis & Evangelos Mitrokostas & Emmanuel Petrakis, 2007. "Endogenous Strategic Managerial Incentive Contracts," Working Papers 0706, University of Crete, Department of Economics.
  3. Amir Rabah, 1995. "Endogenous Timing in Two-Player Games: A Counterexample," Games and Economic Behavior, Elsevier, vol. 9(2), pages 234-237, May.
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  15. Evangelos Mitrokostas & Emmanuel Petrakis, 2008. "Do firms' owners delegate both short-run and long-run decisions to their managers in equilibrium?," Working Papers 0815, University of Crete, Department of Economics.
  16. Steve Dowrick, 1986. "von Stackelberg and Cournot Duopoly: Choosing Roles," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 251-260, Summer.
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