IDEAS home Printed from https://ideas.repec.org/a/eee/chsofr/v69y2014icp253-270.html
   My bibliography  Save this article

Local and global dynamics in a duopoly with price competition and market share delegation

Author

Listed:
  • Fanti, Luciano
  • Gori, Luca
  • Mammana, Cristiana
  • Michetti, Elisabetta

Abstract

This paper aims at studying a nonlinear dynamic duopoly model with price competition and horizontal product differentiation augmented with managerial firms, where managers behave according to market share delegation contracts. Ownership and management are then separate and managers are paid through adequate incentives in order to achieve a competitive advantage in the market. In this context, we show that complexity arises, related both to the structure of the attractors of the system and the structure of their basins, as multistability occurs. The study is conducted by combining analytical and numerical techniques, and aims at showing that slight different initial conditions may cause very different long-term outcomes.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:chsofr:v:69:y:2014:i:c:p:253-270
    DOI: 10.1016/j.chaos.2014.10.006
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0960077914001775
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Fershtman, Chaim & Judd, Kenneth L, 1987. "Equilibrium Incentives in Oligopoly," American Economic Review, American Economic Association, vol. 77(5), pages 927-940, December.
    2. Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 301-325, June.
    3. Steven D. Sklivas, 1987. "The Strategic Choice of Managerial Incentives," RAND Journal of Economics, The RAND Corporation, vol. 18(3), pages 452-458, Autumn.
    4. Thijs Jansen & Arie van Lier & Arjen van Witteloostuijn, 2009. "On the impact of managerial bonus systems on firm profit and market competition: the cases of pure profit, sales, market share and relative profits compared," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 30(3), pages 141-153.
    5. M. Kopel & L. Lambertini, 2012. "On the (non) existence of a price equilibrium in delegation games with relative performance compensation," Working Papers wp807, Dipartimento Scienze Economiche, Universita' di Bologna.
    6. Ritz, Robert A., 2008. "Strategic incentives for market share," International Journal of Industrial Organization, Elsevier, vol. 26(2), pages 586-597, March.
    7. Avinash Dixit, 1979. "A Model of Duopoly Suggesting a Theory of Entry Barriers," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 20-32, Spring.
    8. Giant-italo Bischi & Laura Gardini, 2000. "Global properties of symmetric competition models with riddling and blowout phenomena," Discrete Dynamics in Nature and Society, Hindawi, vol. 5, pages 1-12, January.
    9. Serena Brianzoni & Cristiana Mammana & Elisabetta Michetti, 2012. "Local and Global Dynamics in a Discrete Time Growth Model with Nonconcave Production Function," Discrete Dynamics in Nature and Society, Hindawi, vol. 2012, pages 1-22, December.
    10. Miller, Nolan H & Pazgal, Amit I, 2001. "The Equivalence of Price and Quantity Competition with Delegation," RAND Journal of Economics, The RAND Corporation, vol. 32(2), pages 284-301, Summer.
    11. Lopez, Monica Correa & Naylor, Robin A., 2004. "The Cournot-Bertrand profit differential: A reversal result in a differentiated duopoly with wage bargaining," European Economic Review, Elsevier, vol. 48(3), pages 681-696, June.
    12. 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.
    13. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
    14. Fumas, Vicente Salas, 1992. "Relative performance evaluation of management : The effects on industrial competition and risk sharing," International Journal of Industrial Organization, Elsevier, vol. 10(3), pages 473-489, September.
    15. Michael Kopel & Luca Lambertini, 2013. "On Price Competition with Market Share Delegation Contracts," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 34(1), pages 40-43, January.
    16. 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.
    17. Gray, Sidney, 1995. "Cultural perspectives on the measurement of corporate success," European Management Journal, Elsevier, vol. 13(3), pages 269-275, September.
    18. Bischi Gian Italo & Lamantia Fabio, 2012. "Routes to Complexity Induced by Constraints in Cournot Oligopoly Games with Linear Reaction Functions," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 16(2), pages 1-30, April.
    19. Bischi, Gian Italo & Gardini, Laura & Kopel, Michael, 2000. "Analysis of global bifurcations in a market share attraction model," Journal of Economic Dynamics and Control, Elsevier, vol. 24(5-7), pages 855-879, June.
    20. Fanti, Luciano & Gori, Luca & Sodini, Mauro, 2012. "Nonlinear dynamics in a Cournot duopoly with relative profit delegation," Chaos, Solitons & Fractals, Elsevier, vol. 45(12), pages 1469-1478.
    21. Dixit, Avinash K, 1986. "Comparative Statics for Oligopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(1), pages 107-122, February.
    22. Spence, Michael, 1976. "Product Differentiation and Welfare," American Economic Review, American Economic Association, vol. 66(2), pages 407-414, May.
    23. 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.
    24. Qiu, Larry D., 1997. "On the Dynamic Efficiency of Bertrand and Cournot Equilibria," Journal of Economic Theory, Elsevier, vol. 75(1), pages 213-229, July.
    25. Susan C Borkowski, 1999. "International Managerial Performance Evaluation: A Five Country Comparison," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 30(3), pages 533-555, September.
    26. Fershtman, Chaim, 1985. "Managerial incentives as a strategic variable in duopolistic environment," International Journal of Industrial Organization, Elsevier, vol. 3(2), pages 245-253, June.
    27. Vickers, John, 1985. "Delegation and the Theory of the Firm," Economic Journal, Royal Economic Society, vol. 95(380a), pages 138-147, Supplemen.
    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. Leonard Wang & Ya-Chin Wang, 2010. "Input Pricing and Market Share Delegation in a Vertically Related Market: Is the Timing Order Relevant?," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 17(2), pages 207-221.
    30. Vives, Xavier, 1985. "On the efficiency of Bertrand and Cournot equilibria with product differentation," Journal of Economic Theory, Elsevier, vol. 36(1), pages 166-175, June.
    31. Fanti, Luciano & Gori, Luca & Mammana, Cristiana & Michetti, Elisabetta, 2013. "The dynamics of a Bertrand duopoly with differentiated products: Synchronization, intermittency and global dynamics," Chaos, Solitons & Fractals, Elsevier, vol. 52(C), pages 73-86.
    32. Bischi, Gian-Italo & Stefanini, Luciano & Gardini, Laura, 1998. "Synchronization, intermittency and critical curves in a duopoly game," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 44(6), pages 559-585.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Brianzoni, Serena & Gori, Luca & Michetti, Elisabetta, 2015. "Dynamics of a Bertrand duopoly with differentiated products and nonlinear costs: Analysis, comparisons and new evidences," Chaos, Solitons & Fractals, Elsevier, vol. 79(C), pages 191-203.

    More about this item

    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:eee:chsofr:v:69:y:2014:i:c:p:253-270. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thayer, Thomas R.). General contact details of provider: https://www.journals.elsevier.com/chaos-solitons-and-fractals .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.