Fanti, Luciano and Gori, Luca (2011): Stability analysis in a Cournot duopoly with managerial sales delegation and bounded rationality.
Download (447kB) | Preview
The present study analyses the dynamics of a Cournot duopoly with managerial sales delegation and bounded rational players. We find that when firms’ owners hire a manager and delegate the output decisions to him, the unique Cournot-Nash equilibrium is more likely to be destabilised (through a flip bifurcation) than when firms maximise profits. Moreover, highly periodicity and deterministic chaos can also occur as the managers’ bonus increases.
|Item Type:||MPRA Paper|
|Original Title:||Stability analysis in a Cournot duopoly with managerial sales delegation and bounded rationality|
|English Title:||Stability analysis in a Cournot duopoly with managerial sales delegation and bounded rationality|
|Keywords:||Bifurcation; Chaos; Cournot; Duopoly; Managerial incentive contracts|
|Subjects:||L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets
D - Microeconomics > D4 - Market Structure, Pricing, and Design > 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
|Depositing User:||Luca Gori|
|Date Deposited:||02. Oct 2011 02:54|
|Last Modified:||22. Oct 2015 18:09|
Agiza, H.N., Elsadany, A.A., 2003. Nonlinear dynamics in the Cournot duopoly game with heterogeneous players. Physica A 320, 512–524.
Agiza, H.N., Elsadany, A.A., 2004. Chaotic dynamics in nonlinear duopoly game with heterogeneous players. Applied Mathematics and Computation 149, 843–860.
Agliari, A., Chiarella, C., Gardini, L., 2006. A re-evaluation of adaptive expectations in light of global nonlinear dynamic analysis. Journal of Economic Behavior & Organization 60, 526–552.
Baumol, W., 1958. On the theory of oligopoly. Economica 25, 187–198.
Bischi, G.I., Chiarella, C., Kopel, M., Szidarovszky, F., 2010. Nonlinear Oligopolies. Stability and Bifurcations. Berlin: Springer-Verlag.
Bughin, J., 1995. Unions and strategic managerial incentives. Economics Letters 47, 95–100.
Burmeister, E., 1980. On some conceptual issues in rational expectations modelling. Journal of Money, Credit and Banking 12, 217–228.
Chiarella, C., 1986. Perfect foresight models and the dynamic instability problem from a higher viewpoint. Economic Modelling 3, 283–292.
Chiarella, C., 1990. The Elements of a Nonlinear Theory of Economic Dynamics. Berlin: Springer Verlag.
Correa-López, M., Naylor, R.A., 2004. The Cournot-Bertrand profit differential: a reversal result in a differentiated duopoly with wage bargaining. European Economic Review 48, 681–696.
Coscollá, M.P., Granero, L.M., 2003. Delegation in oligopoly: managerial schemes and loan commitments. Journal of Economics 78, 223–237.
Cournot, A., 1838. Recherches sur les Principes Mathématiques de la Théorie des Richessess. Paris: Hachette.
Dixit, A.K., 1986. Comparative statics for oligopoly. International Economic Review 27, 107–122.
Fama, E.F., Jensen, M.C., 1983. Separation of ownership and control. Journal of Law and Economics 26, 301–325.
Fanti, L., Manfredi, P., 2007. Chaotic business cycles and fiscal policy: An IS-LM model with distributed tax collection lags. Chaos, Solitons and Fractals 32, 736–744.
Fershtman, C., 1985. Managerial incentives as a strategic variable in duopolistic environment. International Journal of Industrial Organization 3, 245–253.
Fershtman, C., Judd, K., 1987. Equilibrium incentives in oligopoly. American Economic Review 77, 927–940.
Grossman, S.J., Stiglitz, J.E., 1977. On Value Maximization and Alternative Objectives of the Firm. Journal of Finance 32, 389–402.
Ishibashi, K., 2001. Strategic delegation under quality competition. Journal of Economics 73, 25–56. Jansen, T., van Lier, A., van Witteloostuijn, A., 2007. A note on strategic delegation: the market share case. International Journal of Industrial Organization 25, 531–539.
Jansen, T., van Lier A., van Witteloostuijn, A., 2009. On the impact of managerial bonus systems on firm profit and market competition: the cases of pure profit, sales, market share and relative profits compared. Managerial and Decision Economics 30, 141–153.
Jensen, M.C., Murphy, K.J., 1990. Performance pay and top management incentives. Journal of Political Economy 98, 225–264.
Kaplan, J.L., Yorke, J.A., 1979. Chaotic behavior of multidimensional difference equations. In: Peitgen, H.O., Walther, H.O., Functional Differential Equations and Approximation of Fixed Points. New York (NY): Springer.
Kopel, M., 1996. Simple and complex adjustment dynamics in Cournot duopoly models. Chaos, Solitons and Fractals 12, 2031–2048.
Lucas, R.E., Jr., 1972. Expectations and the neutrality of money. Journal of Economic Theory 4, 103–124.
Medio, A., 1992. Chaotic Dynamics. Theory and Applications to Economics. Cambridge (UK): Cambridge University Press.
Milgrom, P., Roberts. J., 1982. Limit pricing and entry under incomplete information: an equilibrium analysis. Econometrica 50, 443–459.
Miller, N., Pazgal, A., 2002. Relative performance as a strategic commitment mechanism. Managerial and Decision Economics 23, 51–68.
Muth, J.F., 1961. Rational expectations and the theory of price movements. Econometrica 29, 315–335.
Pal, R., Saha, B., 2008. Union-oligopoly bargaining and entry deterrence: a reassessment of limit pricing. Journal of Economics 95, 121–147.
Puu, T., 1991. Chaos in duopoly pricing. Chaos, Solitons and Fractals 1, 573–581.
Puu, T., 1998. The chaotic duopolists revisited. Journal of Economic Behavior & Organization 33, 385–394.
Salas Fumas, V., 1992. Relative performance evaluation of management. International Journal of Industrial Organization 10, 473–489.
Sargent, T.J., Wallace, N., 1973. The stability of models of money and growth with perfect foresight. Econometrica 41, 1043–1048.
Simon, H., 1957. Simon, Herbert (1957). A behavioral model of rational choice. In: Models of Man, Social and Rational: Mathematical Essays on Rational Human Behavior in a Social Setting. New York (NY): Wiley.
Sklivas, S., 1987. The strategic choice of managerial incentives. RAND Journal of Economics 18, 452–458.
Theocharis R.D. 1960. On the stability of the Cournot solution on the oligopoly problem. Review of Economic Studies 27, 133–134.
Tramontana, F., 2010. Heterogeneous duopoly with isoelastic demand function. Economic Modelling 27, 350–357.
Vickers, J., 1985. Delegation and the theory of the firm. Economic Journal 95, 138–147.
Witteloostuijn, A. van, Jansen, T., van Lier, A., 2007. Bargaining over managerial contracts in delegation games: managerial power, contract disclosure and cartel behavior. Managerial and Decision Economics 28, 897–904.
Zhang, J., Da, Q., Wang, Y., 2007. Analysis of nonlinear duopoly game with heterogeneous players. Economic Modelling 24, 138–148.