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Endogenous choice of strategic incentives in a mixed duopoly with a new managerial delegation contract for the public firm

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  • Nakamura, Yasuhiko

Abstract

This paper revisits the endogenous choice problem of the strategic contracts in a mixed duopoly of one public firm and one managerial private firm, with differentiated goods. This paper considers the situation wherein the separation between ownership and management exists in both the public firm and the private firm. In particular, we focus on a new type of managerial delegation contract in the public firm that is a weighted sum of social welfare and the difference between consumer surplus and producer surplus (sum of each firm's absolute profit). On the other hand, in this paper, the classical sales delegation contract is employed in the private firm. In the above setting, we show that similar to the case wherein both the public firm and the private firm simultaneously use their sales delegation contracts, there does not exist any equilibrium market structure under the class of pure strategies of both the firms. Thus, even if the government as the owner of the public firm provides to her/his manager a strategic delegation contract such that it is easier to manipulate social welfare, we find that it is likely that the indeterminacy in the equilibrium market structure(s) under the class of pure strategies cannot be resolved. Therefore, in this paper, we conclude that the government must devise another style of managerial delegation contract of the public firm in order to assure the equilibrium market structure under the pure strategy class.

Suggested Citation

  • Nakamura, Yasuhiko, 2015. "Endogenous choice of strategic incentives in a mixed duopoly with a new managerial delegation contract for the public firm," International Review of Economics & Finance, Elsevier, vol. 35(C), pages 262-277.
  • Handle: RePEc:eee:reveco:v:35:y:2015:i:c:p:262-277
    DOI: 10.1016/j.iref.2014.10.008
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:reveco:v:56:y:2018:i:c:p:363-370 is not listed on IDEAS
    2. Haraguchi, Junichi & Matsumura, Toshihiro, 2018. "Government-leading welfare-improving collusion," International Review of Economics & Finance, Elsevier, vol. 56(C), pages 363-370.
    3. Lin, Ming Hsin & Matsumura, Toshihiro, 2017. "Optimal Privatization Policy under Private Leadership in Mixed Oligopolies," MPRA Paper 79913, University Library of Munich, Germany.
    4. Wang, Chia-Chi & Chiou, Jiunn-Rong, 2015. "An analysis of policy harmonization on privatization and trade liberalization," International Review of Economics & Finance, Elsevier, vol. 38(C), pages 279-290.

    More about this item

    Keywords

    Mixed duopoly; Strategic delegation; Price competition; Quantity competition;

    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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