Competition within firms
AbstractWe investigate the role of incentives set by a parent firm for competition among its subsidiaries. In a Cournot experiment four subsidiaries of the same parent operate in the same market. Parents earn a specific share of the joint profit and can choose how to distribute the remaining surplus (or loss). Results show that parents allocating profits equally among their subsidiaries reach outcomes close to collusion. However, almost half of the parent firms employ a proportional sharing rule instead. These groups end up with profits around the Cournot level.
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Bibliographic InfoPaper provided by Thurgauer Wirtschaftsinstitut, Universität Konstanz in its series TWI Research Paper Series with number 62.
Date of creation: 2010
Date of revision:
Cournot Competition; Subsidiary; Subcompany; Experiment;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-12-04 (All new papers)
- NEP-BEC-2010-12-04 (Business Economics)
- NEP-COM-2010-12-04 (Industrial Competition)
- NEP-CSE-2010-12-04 (Economics of Strategic Management)
- NEP-EXP-2010-12-04 (Experimental Economics)
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