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Strategic Delegation In A Stackelberg Game With Multiple Stages

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    (Department of Applied Mathematics, University of Crete, Heraklion, Crete 71409, Greece)



    (Department of Economics, University of Crete, 74100 Rethymno, Crete, Greece)

We analyze strategic delegation in a Stackelberg model with an arbitrary number, n, of firms. We show that n-1 firms delegate their production decisions and only one firm (the one whose manager is the first mover) does not. The later a manager commits to a quantity, the higher his incentive rate. Letting $u_i^*$ denote the equilibrium payoff of the firm whose manager commits in the ith stage, we show that $u_n^*>u_{n-1}^*>\cdots>u_2^*>u_1^*$. We also compare the delegation outcome of our game with that of a corresponding Cournot oligopoly and show that managers who commit late (early) are given higher (lower) incentive rates than managers in the Cournot market.

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Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal International Game Theory Review.

Volume (Year): 13 (2011)
Issue (Month): 03 ()
Pages: 341-352

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Handle: RePEc:wsi:igtrxx:v:13:y:2011:i:03:p:341-352
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