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Strategic Delegation and the Shape of Market Competition

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  • Luca Lambertini

Abstract

What shape can we expect market competition to exhibit? This question is addressed in the present paper. Firms are allowed to choose whether to act as quantity or price setters, whether to move early or delay as long as possible at the market stage, and whether to be entrepreneurial or managerial. Moreover, firms can endogenously determine the sequence of such decisions. It is shown that in correspondence of the (unique) subgame perfect equilibrium of the game, all firms first decide to delay, then to act as Cournot competitors, and finally stockholders decide to delegate control to managers. Hence, sequential play between either managerial or entrepreneurial firms, as well as simultaneous play between entrepreneurial firms, are ruled out.

Suggested Citation

  • Luca Lambertini, 2000. "Strategic Delegation and the Shape of Market Competition," Scottish Journal of Political Economy, Scottish Economic Society, vol. 47(5), pages 550-570, November.
  • Handle: RePEc:bla:scotjp:v:47:y:2000:i:5:p:550-570
    DOI: 10.1111/1467-9485.00178
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    1. Chang Ray-Yun & Hu Jin-Li & Lin Yan-Shu, 2018. "The Choice of Prices versus Quantities under Outsourcing," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 18(2), pages 1-20, July.

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    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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