Managerial delegation in monopoly under network effects
AbstractThis paper examines the possibility of emergence of incentive equilibrium in the case of monopoly, without relying on agency theory based arguments. It shows that, when there is network effect of consumption, it is optimal for a monopolist to offer sales-oriented incentive scheme to her manager. The extent of sales-orientation of the optimal incentive scheme is higher in the case of stronger network effect. It also shows that both the monopolist and consumers are better off under managerial delegation than in case of no delegation, unlike as in the case of usual oligopoly without network effect.
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Bibliographic InfoPaper provided by Indira Gandhi Institute of Development Research, Mumbai, India in its series Indira Gandhi Institute of Development Research, Mumbai Working Papers with number 2013-009.
Length: 18 pages
Date of creation: May 2013
Date of revision:
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Incentive equilibrium; Managerial delegation; Monopoly; Network effects;
Find related papers by JEL classification:
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
- L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-07-20 (All new papers)
- NEP-COM-2013-07-20 (Industrial Competition)
- NEP-MIC-2013-07-20 (Microeconomics)
- NEP-MKT-2013-07-20 (Marketing)
- NEP-NET-2013-07-20 (Network Economics)
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