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Management Centrality in Sequential Bargaining: Implications for Strategic Delegation, Welfare, and Stakeholder Conflict

Author

Listed:
  • Buccella Domenico

    (Department of Economics, Kozminski University, Jagiellońska Street, 57/59 – 03301, Warsaw, Poland)

  • Meccheri Nicola

    (Department of Economics and Management, University of Pisa, Via C. Ridolfi, 10, I – 56124, Pisa, Italy)

Abstract

This paper investigates the issue of strategic delegation by considering the role of management centrality in contracting with different stakeholders. In a sequential negotiation unionized duopoly model, the results obtained by profit-maximizing entrepreneurial firms (where strategic choices are taken by firm owners and wage bargaining involves owners and unions) are compared against those of managerial firms (where strategic choices are delegated to managers who are also involved in wage bargaining vis-à-vis unions). Differences in the relative bargaining power among stakeholders (owners, managers and unions) play a key role in determining optimal delegation contracts, as well as the endogenous choice by firm owners to delegate strategic decisions to the management. Moreover, the distribution of stakeholders’ relative bargaining power affects firms’ profitability and overall welfare. In particular, to minimize potential conflict of interests between firm owners and the overall society, regulation directed to soften the managers’ bargaining strength vis-à-vis shareholders must be designed and implemented.

Suggested Citation

  • 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.
    • Handle: RePEc:bpj:bejtec:v:24:y:2024:i:1:p:159-193:n:13
    DOI: 10.1515/bejte-2022-0076
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    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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