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Should Owners of Firms Delegate Long-run Decisions?

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Author Info
F. Javier Casado-Izaga () (Departamento de Fundamentos del Analisis Economico, Universidad del Pais Vasco, Spain)
Juan Carlos Barcena-Ruiz () (Departamento de Fundamentos del Analisis Economico, Universidad del Pais Vasco, Spain)
Abstract

This paper analyzes whether owners of firms have incentives to delegate their long-run decisions to managers or not. The result arising from our analysis shows that owners do have incentives to keep their long-run decisions (the location of the firm) to themselves. In this context we show that the delegation of short-run decisions (prices) to the managers leads to an increase in the degree of product differentiation with regard to the case in which firms do not hire managers.

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File URL: http://www.et.bs.ehu.es/biltoki/EPS/dt9911.pdf
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Publisher Info
Paper provided by Universidad del País Vasco - Departamento de Economía Aplicada III (Econometría y Estadística) in its series BILTOKI with number 199911.

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Date of creation: 19 Nov 1999
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Handle: RePEc:ehu:biltok:199911

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Postal: Dpto. de Econometría y Estadística, Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain
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Related research
Keywords: Managerial incentives Strategic delegation Product differentiation.

Find related papers by JEL classification:
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    Other versions:
  10. Luca Lambertini, 1993. "Equilibrium Locations in the Unconstrained Hotelling Game," Working Papers 155, Dipartimento Scienze Economiche, Università di Bologna.
  11. Carlos Barcena-Ruiz, Juan & Paz Espinosa, Maria, 1999. "Should multiproduct firms provide divisional or corporate incentives?," International Journal of Industrial Organization, Elsevier, vol. 17(5), pages 751-764, July. [Downloadable!] (restricted)
  12. Fershtman, Chaim & Judd, Kenneth L, 1987. "Equilibrium Incentives in Oligopoly," American Economic Review, American Economic Association, vol. 77(5), pages 927-40, December. [Downloadable!] (restricted)
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  13. Szymanski, Stefan, 1994. "Strategic delegation with endogenous costs : A duopoly with wage bargaining," International Journal of Industrial Organization, Elsevier, vol. 12(1), pages 105-116, March. [Downloadable!] (restricted)
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