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Managerial delegation under network effects

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  • Trishita Bhattacharjee

    ()
    (Indira Gandhi Institute of Development Research)

  • Rupayan Pal

    ()
    (Indira Gandhi Institute of Development ResearchInstitute of Economic Growth)

Abstract

This paper shows that network effects do not have any implication to the nature of the equilibrium strategic managerial delegation under Cournot type quantity competition, unlike as in the case of Bertrand type price competition a la Hoernig (2012). It also shows that delegation of output/price decision to the manager is optimal for the owner even in the case of monopoly in the product market, due to the existence of network effects. The monopolist offers sales-oriented incentive scheme to her manager in equilibrium, if there is network effect.

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Bibliographic Info

Paper provided by Indira Gandhi Institute of Development Research, Mumbai, India in its series Indira Gandhi Institute of Development Research, Mumbai Working Papers with number 2013-003.

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Length: 10 pages
Date of creation: Jan 2013
Date of revision:
Handle: RePEc:ind:igiwpp:2013-003

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Keywords: Strategic delegation; Network effects; Quantity competition; Monopoly;

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  1. Hoernig, Steffen, 2012. "Strategic delegation under price competition and network effects," Economics Letters, Elsevier, Elsevier, vol. 117(2), pages 487-489.
  2. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, American Economic Association, vol. 75(3), pages 424-40, June.
  3. Chaim Fershtman & Kenneth L Judd, 1984. "Equilibrium Incentives in Oligopoly," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 642, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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Cited by:
  1. Trishita Bhattacharjee & Rupayan Pal, 2013. "Price vs. Quantity in duopoly with strategic delegation: Role of network externalities," Indira Gandhi Institute of Development Research, Mumbai Working Papers, Indira Gandhi Institute of Development Research, Mumbai, India 2013-010, Indira Gandhi Institute of Development Research, Mumbai, India.

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