Managerial delegation in a Cournot duopoly with partially cooperating firms

This study investigates a quantity-setting duopoly model in which two partially cooperating firms coexist. The following three-stage game is considered. In the first stage, each owner decides whether to hire a manager. In the second stage, the owners who hired managers select incentive parameters for them. In the third stage, the managers or, in their absence, the owners simultaneously and independently choose the firms’ outputs. The study adopts subgame perfection as an equilibrium concept and solves the game by backward induction. The study demonstrates that, in the subgame-perfect equilibrium, both firms hire managers.