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Managerial incentives and endogenous coalition formation with externalities

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  • Mizuno, Keizo

Abstract

This paper examines the managerial incentives of oligopolistic firms with Cournot competition when they have an opportunity to form a coalition for cost reduction. The analysis shows that the introduction of managerial incentives reduces a firm’s incentive to form a coalition. Moreover, a firm that belongs to a coalition has an increased managerial incentive (i.e., it becomes more sales-oriented) as its coalition becomes larger. However, in equilibrium, because of externalities generated from the coalition structure and product market competition, the managerial incentive of a firm in a large coalition can be greater than that of a firm in a grand coalition, while the managerial incentive of a firm in a small coalition can be less than that of a firm under stand-alone production.

Suggested Citation

  • Mizuno, Keizo, 2013. "Managerial incentives and endogenous coalition formation with externalities," Mathematical Social Sciences, Elsevier, vol. 66(1), pages 33-43.
    • Handle: RePEc:eee:matsoc:v:66:y:2013:i:1:p:33-43
    DOI: 10.1016/j.mathsocsci.2013.01.004
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    2. Aitor Ciarreta & Javier García†Enríquez, 2018. "Profitable Strategic Delegation With Conjectural Variations," Bulletin of Economic Research, Wiley Blackwell, vol. 70(2), pages 185-203, April.

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