Fanti, Luciano and Gori, Luca and Sodini, Mauro (2012): Nonlinear dynamics in a Cournot duopoly with relative profit delegation.

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Abstract
The present study analyses the dynamics of a nonlinear Cournot duopoly with managerial delegation and bounded rational players. Problems concerning strategic delegation (based on relative performance evaluations) have recently received in depth attention in both the theoretical and empirical industrial economics literatures. In this paper, we take a dynamic view of this problem and assume that the owners of both firms hire a manager and delegate output decisions to him. Each manager receives a fixed salary plus a bonus offered in a publicly observable contract. The bonus entitled to the manager hired by the owner of every firm is based on relative (profit) performance. Managers of both firms may collude or compete. In such a context, we find, in either cases of collusion and low degree of competition, that synchronised dynamics takes place. However, when the degree of competition increases the dynamics can undergo symmetrybreaking bifurcations that may cause relevant global phenomena. In particular, onoff intermittency and blowout bifurcations are observed for several parameter values. Moreover, coexistence of attractors may also occur. The global behaviour of the noninvertible map is investigated through the study of the transverse Lyapunov exponent and the folding action of the critical curves of the map. These phenomena are impossible under profit maximisation.
Item Type:  MPRA Paper 

Original Title:  Nonlinear dynamics in a Cournot duopoly with relative profit delegation 
English Title:  Nonlinear dynamics in a Cournot duopoly with relative profit delegation 
Language:  English 
Keywords:  Cournot; Managerial delegation; Nonlinear dynamics; Oligopoly; Relative profits 
Subjects:  L  Industrial Organization > L1  Market Structure, Firm Strategy, and Market Performance > L13  Oligopoly and Other Imperfect Markets D  Microeconomics > D4  Market Structure and Pricing > D43  Oligopoly and Other Forms of Market Imperfection C  Mathematical and Quantitative Methods > C6  Mathematical Methods; Programming Models; Mathematical and Simulation Modeling > C62  Existence and Stability Conditions of Equilibrium 
Item ID:  37834 
Depositing User:  Luca Gori 
Date Deposited:  04. Apr 2012 12:55 
Last Modified:  14. Feb 2013 09:37 
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URI:  http://mpra.ub.unimuenchen.de/id/eprint/37834 