Product Differentiation and Relative Performance Evaluation in an Asymmetric Duopoly
In a model of managerial delegation in a duopoly with asymmetric costs, I show that an increase in the intensity of market competition (product differentiation) increases the absolute weight placed on rival's profit (relative performance) in the managerial compensation scheme for both firms and also increases market concentration. The relatively efficient (larger) firm always places higher weight on rival's performance and obtains higher market share.
|Date of creation:||Sep 2007|
|Date of revision:|
|Contact details of provider:|| Postal: Department of Economics, P.O. Box 750496, Southern Methodist University, Dallas, TX 75275-0496|
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- Nolan Miller & Amit Pazgal, 2002. "Relative performance as a strategic commitment mechanism," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 23(2), pages 51-68.
- Chaim Fershtman & Kenneth L Judd, 1984.
"Equilibrium Incentives in Oligopoly,"
642, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Vickers, John, 1985. "Delegation and the Theory of the Firm," Economic Journal, Royal Economic Society, vol. 95(380a), pages 138-47, Supplemen.
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