Managerial delegation under network effects
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.
|Date of creation:||Jan 2013|
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- Fershtman, Chaim & Judd, Kenneth L, 1987.
"Equilibrium Incentives in Oligopoly,"
American Economic Review,
American Economic Association, vol. 77(5), pages 927-940, December.
- Chaim Fershtman & Kenneth L Judd, 1984. "Equilibrium Incentives in Oligopoly," Discussion Papers 642, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-440, June.
- Hoernig, Steffen, 2012. "Strategic delegation under price competition and network effects," Economics Letters, Elsevier, vol. 117(2), pages 487-489. Full references (including those not matched with items on IDEAS)
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