Strategic delegation effects on Cournot and Stackelberg competition

Michelacakis, Nickolas (2016): Strategic delegation effects on Cournot and Stackelberg competition.

Abstract

This paper compares the outcomes of two three-stage games of two firms competing for quantity with managerial delegation. In fact, we prove that simultaneous choice of managers by the proprietors of the firms followed by Stackelberg-type competition is equivalent to sequential choice of managers followed by Cournot-type competition. We prove equivalence in a general setting, namely, when the duopolistic model is characterised by a non-linear inverse demand function.

• Item Type: MPRA Paper
• Language: English
• Keywords: Strategic delegation; Cournot competition; Stackelberg competition
• Subjects: D - Microeconomics > D4 - Market Structure, Pricing, and Design > D43 - Oligopoly and Other Forms of Market Imperfection; 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

References

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

Gal-Or E.: ``First mover and second mover advantages", International Economic Review 26 (1985), 649-653.

Kopel M. and Loeffler C.: ``Commitment, first-mover and second-mover advantage", Journal of Economics 94 (2008), 143-166.

Sklivas S.: ``The strategic choice of managerial incentives", Rand Journal of Economics 18 (1987), 452-458.

Stamatopoulos G.: ``Cournot and Stackelberg equilibrium under strategic delegation: an equivalence result", (private communication, 2014-07-24)}.

Vickers J.: ``Delegation and the theory of the firm", Economic Journal 95 (1985), 138-147.