IDEAS home Printed from https://ideas.repec.org/p/pie/dsedps/2017-215.html
   My bibliography  Save this paper

Firms controlled by owners and managerial firms: the "strategic" trade policy game revisited

Author

Listed:
  • Luciano Fanti
  • Domenico Buccella

Abstract

This paper revisits the strategic trade policy issue by considering a bargaining process over managerial contracts and different firms' organizational structures, that is, either family ownership keeping also the firm's control or atomistic shareholders whose board of directors delegate output choice to managers. We show that, in contrast to the traditional results, a plethora of Nash equilibria emerges and the implementation of trade policies in both countries may be efficient (i.e. national social welfares are higher than under free trade) in the presence of a bargaining process in a sales delegation game, depending on the manager's bargaining power as well as the degree of product competition.

Suggested Citation

  • Luciano Fanti & Domenico Buccella, 2017. "Firms controlled by owners and managerial firms: the "strategic" trade policy game revisited," Discussion Papers 2017/215, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    • Handle: RePEc:pie:dsedps:2017/215
    Note: ISSN 2039-1854
    as

    Download full text from publisher

    File URL: https://www.ec.unipi.it/documents/Ricerca/papers/2017-215.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Brander, James A. & Spencer, Barbara J., 1988. "Unionized oligopoly and international trade policy," Journal of International Economics, Elsevier, vol. 24(3-4), pages 217-234, May.
    2. Ritz, Robert A., 2008. "Strategic incentives for market share," International Journal of Industrial Organization, Elsevier, vol. 26(2), pages 586-597, March.
    3. Paul Krugman, 1986. "Strategic Trade Policy and the New International Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262610450, December.
    4. repec:ebl:ecbull:v:6:y:2008:i:38:p:1-8 is not listed on IDEAS
    5. Arjen van Witteloostuijn & Thijs Jansen & Arie van Lier, 2007. "Bargaining over managerial contracts in delegation games: managerial power, contract disclosure and cartel behavior," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(8), pages 897-904.
    6. repec:ebl:ecbull:v:12:y:2008:i:6:p:1-8 is not listed on IDEAS
    7. Leonard F. S. Wang & Wei Zhao & Ya -Chin Wang, 2008. "Strategic Trade Policy in Bargaining over Managerial Delegation Competition," Economics Bulletin, AccessEcon, vol. 6(38), pages 1-8.
    8. repec:ebl:ecbull:v:12:y:2008:i:16:p:1-7 is not listed on IDEAS
    9. Jansen, Thijs & van Lier, Arie & van Witteloostuijn, Arjen, 2007. "A note on strategic delegation: The market share case," International Journal of Industrial Organization, Elsevier, vol. 25(3), pages 531-539, June.
    10. Yasuhiko Nakamura, 2012. "Bargaining over Managerial Contracts in Delegation Games: The Generalized Oligopolistic Case," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 33(4), pages 249-272, June.
    11. G. M. Grossman & K. Rogoff (ed.), 1995. "Handbook of International Economics," Handbook of International Economics, Elsevier, edition 1, volume 3, number 3.
    12. Vickers, John, 1985. "Delegation and the Theory of the Firm," Economic Journal, Royal Economic Society, vol. 95(380a), pages 138-147, Supplemen.
    13. Fershtman, Chaim & Judd, Kenneth L, 1987. "Equilibrium Incentives in Oligopoly," American Economic Review, American Economic Association, vol. 77(5), pages 927-940, December.
    14. Luciano Fanti & Luca Gori & Mauro Sodini, 2017. "The Bargaining–sales‐delegation Game," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 38(6), pages 857-889, September.
    15. repec:ebl:ecbull:v:12:y:2008:i:7:p:1-8 is not listed on IDEAS
    16. Yasuhiko Nakamura, 2008. "Bargaining over Managerial Contracts in Delegation Games: The Differentiated Goods Case," Economics Bulletin, AccessEcon, vol. 12(6), pages 1-8.
    17. Nakamura, Yasuhiko, 2011. "Bargaining over managerial delegation contracts and merger incentives in an international oligopoly," Research in Economics, Elsevier, vol. 65(1), pages 47-61, March.
    18. Miller, Nolan H. & Pazgal, Amit, 2005. "Strategic trade and delegated competition," Journal of International Economics, Elsevier, vol. 66(1), pages 215-231, May.
    19. Brander, James A., 1995. "Strategic trade policy," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 27, pages 1395-1455, Elsevier.
    20. Luciano Fanti & Luca Gori & Mauro Sodini, 2017. "Managerial Delegation Theory Revisited," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 38(4), pages 490-512, June.
    21. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
    22. Das, Satya P., 1997. "Strategic managerial delegation and trade policy," Journal of International Economics, Elsevier, vol. 43(1-2), pages 173-188, August.
    23. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February.
    24. Nolan Miller & Amit Pazgal, 2002. "Relative performance as a strategic commitment mechanism," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 23(2), pages 51-68.
    25. Yasuhiko Nakamura, 2011. "Bargaining Over Managerial Delegation Contracts And Merger Incentives With Asymmetric Costs," Manchester School, University of Manchester, vol. 79(4), pages 718-739, July.
    26. Yasuhiko Nakamura, 2008. "Bargaining over Managerial Contracts in Delegation Games: The Quadratic Cost Case," Economics Bulletin, AccessEcon, vol. 12(16), pages 1-7.
    27. Marianne Bertrand & Sendhil Mullainathan, 2001. "Are CEOs Rewarded for Luck? The Ones Without Principals Are," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(3), pages 901-932.
    28. Leonard Wang & Ya-Chin Wang & Lihong Zhao, 2009. "Market Share Delegation and Strategic Trade Policy," Journal of Industry, Competition and Trade, Springer, vol. 9(1), pages 49-56, March.
    29. Yasuhiko Nakamura & Kohei Kamaga, 2008. "Bargaining over Managerial Contracts in Delegation Games: The Sequential Move Case," Economics Bulletin, AccessEcon, vol. 12(7), pages 1-8.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ya‐chin Wang & Leonard F.s. Wang, 2009. "Equivalence Of Competition Mode In A Vertically Differentiated Duopoly With Delegation," South African Journal of Economics, Economic Society of South Africa, vol. 77(4), pages 577-590, December.
    2. repec:ebl:ecbull:v:6:y:2008:i:38:p:1-8 is not listed on IDEAS
    3. Leonard F. S. Wang & Wei Zhao & Ya -Chin Wang, 2008. "Strategic Trade Policy in Bargaining over Managerial Delegation Competition," Economics Bulletin, AccessEcon, vol. 6(38), pages 1-8.
    4. Nakamura, Yasuhiko, 2011. "Bargaining over managerial delegation contracts and merger incentives in an international oligopoly," Research in Economics, Elsevier, vol. 65(1), pages 47-61, March.
    5. Stamatopoulos, Giorgos, 2018. "Bargaining over managerial contracts: a note," MPRA Paper 86143, University Library of Munich, Germany.
    6. Yasuhiko Nakamura, 2017. "Price Versus Quantity in a Duopoly with a Unilateral Effect and with Bargaining over Managerial Contracts," Journal of Industry, Competition and Trade, Springer, vol. 17(1), pages 83-119, March.
    7. Stefano Colombo, 2022. "Prisoner dilemma in a vertical duopoly with managerial delegation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(5), pages 1476-1481, July.
    8. Anomita Ghosh & Rupayan Pal, 2014. "Strategic trade policy for network goods oligopolies," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2014-039, Indira Gandhi Institute of Development Research, Mumbai, India.
    9. Buccella Domenico & Meccheri Nicola, 2024. "Management Centrality in Sequential Bargaining: Implications for Strategic Delegation, Welfare, and Stakeholder Conflict," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 24(1), pages 159-193, January.
    10. Fanti, Luciano & Buccella, Domenico, 2016. "Passive unilateral cross-ownership and strategic trade policy," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 10, pages 1-22.
    11. repec:ebl:ecbull:v:12:y:2008:i:16:p:1-7 is not listed on IDEAS
    12. Ya-Chin Wang, 2013. "Optimal R&D Policy and Managerial Delegation Under Vertically Differentiated Duopoly," South African Journal of Economics, Economic Society of South Africa, vol. 81(4), pages 605-624, December.
    13. Yasuhiko Nakamura, 2008. "Bargaining over Managerial Contracts in Delegation Games: The Quadratic Cost Case," Economics Bulletin, AccessEcon, vol. 12(16), pages 1-7.
    14. Fanti, Luciano & Gori, Luca & Mammana, Cristiana & Michetti, Elisabetta, 2014. "Local and global dynamics in a duopoly with price competition and market share delegation," Chaos, Solitons & Fractals, Elsevier, vol. 69(C), pages 253-270.
    15. Bian, Junsong & Li, Kevin W. & Guo, Xiaolei, 2016. "A strategic analysis of incorporating CSR into managerial incentive design," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 86(C), pages 83-93.
    16. Leonard F. S. Wang, 2020. "Relative Performance Versus Market Share Delegation in a Vertically Related Market," Arthaniti: Journal of Economic Theory and Practice, , vol. 19(1), pages 16-27, June.
    17. Barreda-Tarrazona, Iván & Georgantzís, Nikolaos & Manasakis, Constantine & Mitrokostas, Evangelos & Petrakis, Emmanuel, 2016. "Endogenous managerial compensation contracts in experimental quantity-setting duopolies," Economic Modelling, Elsevier, vol. 54(C), pages 205-217.
    18. Luca Gori & Nicolò Pecora & Mauro Sodini, 2017. "Market share delegation in a nonlinear duopoly with quantity competition: the role of dynamic entry barriers," Journal of Evolutionary Economics, Springer, vol. 27(5), pages 905-931, November.
    19. Xingtang Wang & Leonard F.S. Wang, 2021. "External bargaining versus internal manipulation: A theory of managerial delegation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(1), pages 134-142, January.
    20. Jumpei Hamamura, 2021. "What level do disadvantaged firms weight rivals' profits in relative performance evaluations under quantity competition?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(2), pages 493-501, March.
    21. Zhu, Yan-lan & Zhou, Wei & Chu, Tong, 2022. "Analysis of complex dynamical behavior in a mixed duopoly model with heterogeneous goods," Chaos, Solitons & Fractals, Elsevier, vol. 159(C).
    22. Iván Barreda-Tarrazona & Nikolaos Georgantzís & Constantine Manasakis & Evangelos Mitrokostas & Emmanuel Petrakis, 2012. "Managerial compensation contracts in quantity-setting duopoly," Working Papers 2012/17, Economics Department, Universitat Jaume I, Castellón (Spain).

    More about this item

    Keywords

    Export subsidy/tax; Prisoner EÖs dilemma; Managerial Delegation; Owner-Manager Bargaining; Cournot duopoly.;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pie:dsedps:2017/215. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/dspisit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.