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Incentives in supply function equilibrium

Author

Listed:
  • Vetter, Henrik

Abstract

The author analyses delegation in homogenous duopoly under the assumption that firm-managers compete in supply functions. He reverses earlier findings in that owners give managers incentives to act in an accommodating way. That is, optimal delegation reduces per-firm output and increases profits to above-Cournot profits. Moreover, in supply function equilibrium, the mode of competition is endogenous. This means that the author avoids results that are sensitive with respect to assuming either Cournot or Bertrand competition.

Suggested Citation

  • Vetter, Henrik, 2015. "Incentives in supply function equilibrium," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 9, pages 1-20.
  • Handle: RePEc:zbw:ifweej:20155
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    File URL: http://dx.doi.org/10.5018/economics-ejournal.ja.2015-5
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    File URL: https://www.econstor.eu/bitstream/10419/107213/1/818300140.pdf
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    More about this item

    Keywords

    Delegation; incentives; supply function equilibrium;

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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