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Managerial delegation in monopoly under network effects

Author

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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 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.

Suggested Citation

  • Trishita Bhattacharjee & Rupayan Pal, 2013. "Managerial delegation in monopoly under network effects," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2013-009, Indira Gandhi Institute of Development Research, Mumbai, India.
    • Handle: RePEc:ind:igiwpp:2013-009
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    File URL: http://www.igidr.ac.in/pdf/publication/WP-2013-009.pdf
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    References listed on IDEAS

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    Cited by:

    1. Luciano Fanti & Domenico Buccella, 2017. "Manager‐Union Bargaining Agenda Under Monopoly and with Network Effects," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 38(6), pages 717-730, September.

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    More about this item

    Keywords

    Incentive equilibrium; Managerial delegation; Monopoly; Network effects;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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