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Managerial delegation under network effects

  • Trishita Bhattacharjee


    (Indira Gandhi Institute of Development Research)

  • Rupayan Pal


    (Indira Gandhi Institute of Development ResearchInstitute of Economic Growth)

This paper shows that network effects do not have any implication to the nature of the equilibrium strategic managerial delegation under Cournot type quantity competition, unlike as in the case of Bertrand type price competition a la Hoernig (2012). It also shows that delegation of output/price decision to the manager is optimal for the owner even in the case of monopoly in the product market, due to the existence of network effects. The monopolist offers sales-oriented incentive scheme to her manager in equilibrium, if there is network effect.

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Paper provided by Indira Gandhi Institute of Development Research, Mumbai, India in its series Indira Gandhi Institute of Development Research, Mumbai Working Papers with number 2013-003.

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Length: 10 pages
Date of creation: Jan 2013
Date of revision:
Handle: RePEc:ind:igiwpp:2013-003
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  1. Fershtman, Chaim & Judd, Kenneth L, 1987. "Equilibrium Incentives in Oligopoly," American Economic Review, American Economic Association, vol. 77(5), pages 927-40, December.
  2. Hoernig, Steffen, 2012. "Strategic delegation under price competition and network effects," Economics Letters, Elsevier, vol. 117(2), pages 487-489.
  3. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June.
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