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Choice of Flexible Production Technologies Under Strategic Delegation

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  • Bárcena Ruiz, Juan Carlos
  • Olaizola Ortega, María Norma

Abstract

This work analyzes a managerial delegation model in which firms can choose between a flexible production technology which allows them to produce two different products and a dedicated production technology which limits production to only one product. We analyze whether the incentives to adopt the flexible technology are smaller or greater in a managerial delegation model than under strict profit maximization. We obtain that the asymmetric equilibrium in which only one firm adopts the flexible technology can be sustained under strategic delegation but not under strict profit maximization when products are substitutes. We extend the analysis to consider welfare implications.

Suggested Citation

  • Bárcena Ruiz, Juan Carlos & Olaizola Ortega, María Norma, 2004. "Choice of Flexible Production Technologies Under Strategic Delegation," IKERLANAK info:eu-repo/grantAgreeme, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    • Handle: RePEc:ehu:ikerla:6491
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    1. Kim, Taekwon & Roller, Lars-Hendrik & Tombak, Mihkel M, 1992. "Strategic Choice of Flexible Production Technologies and Welfare Implications: Addendum et Corrigendum," Journal of Industrial Economics, Wiley Blackwell, vol. 40(2), pages 233-235, June.
    2. Juan Carlos Bárcena‐Ruiz & Norma Olaizola, 2006. "Cost‐Saving Production Technologies And Strategic Delegation," Australian Economic Papers, Wiley Blackwell, vol. 45(2), pages 141-157, June.
    3. Steven D. Sklivas, 1987. "The Strategic Choice of Managerial Incentives," RAND Journal of Economics, The RAND Corporation, vol. 18(3), pages 452-458, Autumn.
    4. Anderson, Simon P & Engers, Maxim, 1994. "Strategic Investment and Timing of Entry," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(4), pages 833-853, November.
    5. Roller, Lars-Hendrik & Tombak, Mihkel M, 1990. "Strategic Choice of Flexible Production Technologies and Welfare Implications," Journal of Industrial Economics, Wiley Blackwell, vol. 38(4), pages 417-431, June.
    6. Juan Carlos Barcena-Ruiz & Norma Olaizola, 2007. "Cost-saving production technologies and partial ownership," Economics Bulletin, AccessEcon, vol. 15(6), pages 1-8.
    7. repec:ehu:ikerla:6495 is not listed on IDEAS
    8. Gotz, Georg, 2000. "Strategic timing of adoption of new technologies under uncertainty: A note," International Journal of Industrial Organization, Elsevier, vol. 18(2), pages 369-379, February.
    9. Vickers, John, 1985. "Delegation and the Theory of the Firm," Economic Journal, Royal Economic Society, vol. 95(380a), pages 138-147, Supplemen.
    10. Chaim Fershtman & Kenneth L. Judd, 2006. "Equilibrium Incentives in Oligopoly: Corrigendum," American Economic Review, American Economic Association, vol. 96(4), pages 1367-1367, September.
    11. Ana I. Saracho, 2002. "Patent Licensing Under Strategic Delegation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 11(2), pages 225-251, June.
    12. Bárcena Ruiz, Juan Carlos & Olaizola Ortega, María Norma, 2004. "Cost-Saving production technologies and strategic delegation," IKERLANAK 2004-12, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
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