Strategic commitment to pursue a goal other than profit in a Cournot duopoly

Rtischev, Dimitry (2012): Strategic commitment to pursue a goal other than profit in a Cournot duopoly. Published in: Gakushuin Economic Papers , Vol. 49, No. 2 (July 2012): pp. 133-142.

Abstract

Competition among profit-seeking firms in an oligopolistic industry inherently generates incentives for firms to commit to maximize a performance metric other than profit. We briefly review the underlying theory, analyze its ramifications in a Cournot duopoly, and consider feasibility constraints from the perspective of strategic management.

• Item Type: MPRA Paper
• Language: English
• Keywords: oligopolistic competition; strategic commitment; strategic delegation
• 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 > L21 - Business Objectives of the Firm; D - Microeconomics > D4 - Market Structure, Pricing, and Design > D43 - Oligopoly and Other Forms of Market Imperfection

References

M. Aoki (1988) Information, Incentives and Bargaining in the Japanese Economy, Cambridge University Press, Cambridge

A. Blinder (1993) “A simple note on the Japanese firm” Journal of the Japanese and International Economies 7:3, 238-255

M. Dufwenberg and W. Guth (1999) “Indirect evolution vs. strategic delegation: a comparison of two approaches to explaining economic institutions” European Journal of Political Economy 15, 281-295

F. Englmaier (2011) “Commitment in R&D tournaments via strategic delegation to overoptimistic managers” Managerial and Decision Economics 32:1, 63-69

C. Fershtman and K. L. Judd (1987) “Equilibrium incentives in oligopoly” American Economic Review 77:5, 927-940

T. Gehrig, W. Guth, and R. Levinsky (2004) “The commitment effect in belief evolution” Economics Letters 85, 163-166

W. Guth and H. Kliemt (1998) “The indirect evolutionary approach: bridging the gap between rationality and adaptation” Rationality and Society 10(3), 377-399

A. Heifetz, C. Shannon, Y. Spiegel (2007) “What to maximize if you must” Journal of Economic Theory 133, 31-57

N. Miller and A. Pazgal (2002) “Relative performance as a strategic commitment mechanism” Managerial and Decision Economics 23, 51-68

E. Winter, I. Garcia-Jurado, J. Mendez-Naya, L. Mendez-Naya (2009) “Mental equilibrium and rational emotions” Discussion Paper 521, Center For The Study Of Rationality, The Hebrew University of Jerusalem