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Divisionalization and Delegation in Oligopoly

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  • Miguel González-Maestre

Abstract

We consider a model where oligopolistic firms create independent divisions or franchises, which subsequently delegate output decisions to managers. We show that the number of firms required to make divisionalization privately profitable is greater in our model than in previous pure divisionalization models. However, in contrast with pure delegation models, we show that the subgame perfect Nash equilibrium approaches perfect competition as divisionalization costs tends to zero, even with a small fixed number of firms. Copyright (c) 2000 Massachusetts Institute of Technology.

Suggested Citation

  • Miguel González-Maestre, 2000. "Divisionalization and Delegation in Oligopoly," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(3), pages 321-338, June.
  • Handle: RePEc:bla:jemstr:v:9:y:2000:i:3:p:321-338
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    References listed on IDEAS

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    Cited by:

    1. Bhattacharjee Trishita & Pal Rupayan, 2014. "Network Externalities and Strategic Managerial Delegation in Cournot Duopoly: Is There a Prisoners’ Dilemma?," Review of Network Economics, De Gruyter, pages 343-353.
    2. Paula González & Carmen Herrero, 2004. "Optimal sharing of surgical costs in the presence of queues," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 59(3), pages 435-446, July.
    3. Ramón Faulí-Oller & Lluís Bru & José Manuel Ordóñez de Haro, 2001. "Divisionalization In Vertical Structures," Working Papers. Serie AD 2001-28, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    4. Tsygankova, Marina, 2010. "When is a break-up of Gazprom good for Russia?," Energy Economics, Elsevier, pages 908-917.
    5. Barreda-Tarrazona, Iván & Georgantzís, Nikolaos & Manasakis, Constantine & Mitrokostas, Evangelos & Petrakis, Emmanuel, 2016. "Endogenous managerial compensation contracts in experimental quantity-setting duopolies," Economic Modelling, Elsevier, pages 205-217.
    6. Rupayan Pal, 2014. "Managerial delegation in monopoly and social welfare," International Journal of Economic Theory, The International Society for Economic Theory, vol. 10(4), pages 403-410, December.
    7. Michiel Bijlsma & Gijsbert Zwart, 2009. "Competition for access; spectrum rights and downstream access in wireless telecommunications," CPB Discussion Paper 123, CPB Netherlands Bureau for Economic Policy Analysis.
    8. Neubauer, Silke, 1997. "Interdivisional information sharing: the strategic advantage of knowing nothing," Discussion Papers, Research Unit: Market Dynamics FS IV 97-33, Social Science Research Center Berlin (WZB).
    9. 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).
    10. Michael L. Katz, 2006. "Observable Contracts as Commitments: Interdependent Contracts and Moral Hazard," Journal of Economics & Management Strategy, Wiley Blackwell, pages 685-706.
    11. Marina Tsygankova, 2007. "When is Mighty Gazprom Good for Russia?," Discussion Papers 526, Statistics Norway, Research Department.

    More about this item

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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