Scrimitore, Marcella (2010): Managerial Incentives and Stackelberg Equilibria in Oligopoly.
Download (300kB) | Preview
The paper investigates both quantity and price oligopoly games in markets with a variable number of managerial and entrepreneurial firms which defines market structure. Following Vickers (Economic Journal, 1985) which establishes an equivalence between the equilibrium under unilateral delegation and the Stackelberg quantity equilibrium, the outcomes of these games are compared with the ones in sequential multi-leaders and multi-followers games. The profitability of a managerial/entrepreneurial attitude vs leadership/followership is shown to critically depend upon the kind of strategy, price or quantity, and upon the assumed market structure. Indeed, the latter turns out to be crucial in determining the equivalence result that is shown to be contingent on the assumption that just one leader or one managerial firm operate in the market. A welfare analysis finally highlights the differences between the delegation and the sequential games, focusing on the impact of market structure and imperfect substitutability on the equilibria of the two games.
|Item Type:||MPRA Paper|
|Original Title:||Managerial Incentives and Stackelberg Equilibria in Oligopoly|
|Keywords:||Strategic delegation; sequential games; quantity and price competition; welfare analysis;|
|Subjects:||L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets
L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L22 - Firm Organization and Market Structure
C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games
|Depositing User:||Marcella Scrimitore|
|Date Deposited:||08. Aug 2010 02:28|
|Last Modified:||13. Feb 2013 02:51|
Amir, R. and Stepanova, A. (2006). 'Second-mover Advantage and Price Leadership in Bertrand Duopoly', Games and Economic Behavior, Vol. 55, pp. 1-20.
Barros, F. and Grilo, I. (2002). 'Delegation in a Vertically Differentiated Duopoly', Manchester School, Vol. 70, pp. 164-84.
Basu, K. (1995). 'Stackelberg Equilibrium in Oligopoly: an Explanation Based on Managerial Incentives', Economics Letters, Vol. 49, pp. 459-464.
Boyer, M. and Moreaux, M. (1987). 'On Stackelberg Equilibria with Differentiated Products: The Critical Role of the Strategy Space', The Journal of Industrial Economics, Vol. 36, pp. 217-230.
Dixit, A. and Nalebuff, B. (1991). Making Strategies Credible. In R. Zeckhauser (ed.), Strategy and Choice. Cambridge, MA, MIT Press.
Daughety, A. F. (1990). 'Beneficial Concentration', American Economic Review, Vol. 80, pp. 1231-1237.
Etro, F. (2007). Competition, Innovation, and Antitrust: A Theory of Market Leaders and Its Policy Implications. New York and Berlin, Springer-Verlag.
Fershtman, C. and Judd, K.L. (1987). 'Equilibrium Incentives in Oligopoly', American Economic Review, Vol. 77, pp. 926-940.
Gal-Or, E. (1985). 'First Mover and Second Mover Advantages', International Economic Review, Vol. 26, pp. 649-53.
Hamilton, J.H. and Slutsky, S.M. (1990). 'Endogenous Timing in Duopoly Games: Stackelberg or Cournot equilibria', Games and Econonomic Behavior, Vol. 2, pp. 29-46.
Huck, S., Konrad, K.A. and Müller, W. (2001). 'Big fish eat small fish: on Merger in Stackelberg Markets', Economics Letters, Vol. 73, pp. 213-217.
Huck, S., and Rey-Biel, P. (2006). 'Endogenous Leadership in Teams', Journal of Institutional and Theoretical Economics, Vol. 162, pp. 253-61.
Ino, H., and Matsumura, T. (2009). 'How Many Firms Should Be Leaders? Beneficial Concentration Revisited', Discussion Paper Series School of Economics Kwansei Gakuin University, No. 48.
Lambertini, L. (2000). 'Strategic Delegation and the Shape of Market Competition', Scottish Journal of Political Economy, Vol. 47, pp. 550-70.
Lambertini, L. and Trombetta, M. (2002). 'Delegation and firms' ability to collude', Journal of Economic Behavior & Organization, Vol. 47, pp. 359-373.
Pal, D. and Sarkar, J. (2002). 'A Stackelberg Oligopoly with Nonidentical Firms', Bulletin of Economic Research, Vol. 53, pp. 127-134.
Okuguchi, K. and Yamazaki, T. (1994). 'Bertrand and Hierarchical Stackelberg Oligopolies with Product Differentiation', Keio Economic Studies, Vol 31, 75--80. Schelling, T. C. (1960). The Strategy of Conflict, Cambridge, MA, Harvard University Press.
Levitan, R. (1980). Market Structure and Behavior, Cambridge, MA, Harvard University Press.
Sklivas, S.D. (1987). 'The Strategic Choice of Managerial Incentives', RAND Journal of Economics, Vol. 18, pp. 452-458.
Van Damme, E. and Hurkens, S. (1999). 'Endogenous Stackelberg leadership', Games and Economic Behavior, Vol. 28, pp. 105-29.
Vickers, J. (1985). 'Delegation and the Theory of the Firm', The Economic Journal, Vol. 95, pp. 138-147.
Vives, X. (1985) 'On the Efficiency of Bertrand and Cournot Equilibria with Product Differentiation', Journal of Economic Theory, Vol. 36, pp. 166-175.
White, M.D (2001). 'Managerial Incentives and the Decision to Hire managers in Markets with Public and Private Firms', European Journal of Political Economy, Vol. 17, pp. 877-896.
Available Versions of this Item
- Managerial Incentives and Stackelberg Equilibria in Oligopoly. (deposited 08. Aug 2010 02:28) [Currently Displayed]