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Should Owners of Firms Delegate Long-run Decisions?

  • Bárcena Ruiz, Juan Carlos
  • Casado Izaga, Francisco Javier

This paper analyzes whether owners of firms have incentives to delegate their long-run decisions to managers or not. The result arising from our analysis shows that owners do have incentives to keep their long-run decisions (the location of the firm) to themselves. In this context we show that the delegation of short-run decisions (prices) to the managers leads to an increase in the degree of product differentiation with regard to the case in which firms do not hire managers.

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Paper provided by Universidad del País Vasco - Departamento de Economía Aplicada III (Econometría y Estadística) in its series BILTOKI with number 1999-11.

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Date of creation: Nov 1999
Date of revision:
Handle: RePEc:ehu:biltok:199911
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Order Information: Postal: Dpto. de Econometría y Estadística, Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain

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  1. Szymanski, Stefan, 1994. "Strategic delegation with endogenous costs : A duopoly with wage bargaining," International Journal of Industrial Organization, Elsevier, vol. 12(1), pages 105-116, March.
  2. F. Javier Casado-Izaga, 2000. "Location decisions: The role of uncertainty about consumer tastes," Journal of Economics, Springer, vol. 71(1), pages 31-46, February.
  3. Juan Carlos Barcena-Ruiz & Maria Paz Espinosa, 1996. "Long-Term or Short-Term Managerial Incentive Contracts," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 5(3), pages 343-359, 09.
  4. Michael L. Katz, 1991. "Game-Playing Agents: Unobservable Contracts as Precommitments," RAND Journal of Economics, The RAND Corporation, vol. 22(3), pages 307-328, Autumn.
  5. Chaim Fershtman & Kenneth L Judd, 1984. "Equilibrium Incentives in Oligopoly," Discussion Papers 642, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  6. Steven D. Sklivas, 1987. "The Strategic Choice of Managerial Incentives," RAND Journal of Economics, The RAND Corporation, vol. 18(3), pages 452-458, Autumn.
  7. Oliver D. Hart, 1983. "The Market Mechanism as an Incentive Scheme," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 366-382, Autumn.
  8. d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-50, September.
  9. Tabuchi, Takatoshi & Thisse, Jacques-Francois, 1995. "Asymmetric equilibria in spatial competition," International Journal of Industrial Organization, Elsevier, vol. 13(2), pages 213-227.
  10. David Scharfstein, 1988. "Product-Market Competition and Managerial Slack," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 147-155, Spring.
  11. Ramón Faulí-Oller & Massimo Motta, 1996. "Managerial incentives for takeovers," Working Papers. Serie AD 1996-22, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  12. Carlos Barcena-Ruiz, Juan & Paz Espinosa, Maria, 1999. "Should multiproduct firms provide divisional or corporate incentives?," International Journal of Industrial Organization, Elsevier, vol. 17(5), pages 751-764, July.
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