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Price Versus Quantity in a Duopoly with a Unilateral Effect and with Bargaining over Managerial Contracts

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  • Yasuhiko Nakamura

    () (Nihon University)

Abstract

This study examines the endogenous choice of each firm’s strategic contract, that is, a price contract or a quantity contract, in a duopoly in which their demand functions are asymmetric when the content of their managerial contracts is determined through bargaining between the owner and the manager. The degree of asymmetry between their demand functions corresponds to the relation between the goods they produce. In contrast to the case wherein each firm’s delegation parameter is determined through profit maximization, we show that the quantity competition cannot become the equilibrium market structure when the bargaining power of the manager relative to that of the owner is sufficiently low. In particular, when the relation between the two goods is complementary, two asymmetric market structures can be observed in equilibrium. Furthermore, we consider the situation in which the relative bargaining power of the manager to that of the owner within each firm is different between the two firms.

Suggested Citation

  • Yasuhiko Nakamura, 2017. "Price Versus Quantity in a Duopoly with a Unilateral Effect and with Bargaining over Managerial Contracts," Journal of Industry, Competition and Trade, Springer, vol. 17(1), pages 83-119, March.
  • Handle: RePEc:kap:jincot:v:17:y:2017:i:1:d:10.1007_s10842-016-0232-1
    DOI: 10.1007/s10842-016-0232-1
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    References listed on IDEAS

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    Cited by:

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    2. Yasuhiko Nakamura, 2018. "Endogenous Market Structures in the Presence of a Socially Responsible Firm," Journal of Industry, Competition and Trade, Springer, vol. 18(3), pages 319-348, September.

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    More about this item

    Keywords

    Cournot; Bertrand; Managerial delegation; Delegation contract bargaining; Asymmetric demand functions;
    All these keywords.

    JEL classification:

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

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