Original scientific paper
https://doi.org/10.1080/1331677X.2017.1311227
Strategic delegation and second mover advantage in duopoly
Jeong-Yoo Kim
Joon Yeop Kwon
Abstract
We consider a duopoly in which each firm has one owner and one
manager playing a multi-stage delegation game. The decision of
each firm consists of two stages. In the first stage, the owner offers
his manager a contract based on profits and sales. In the second
stage, the manager chooses its output or price. Several possible
sequential games will be analysed, depending on the sequence of
the strategic variables. In the first scenario in which firm 1 makes a
contract decision and a producing decision sequentially, and firm 2
follows in the same fashion, we show that any delegation equilibrium
in which both owners commit their managers to profit-maximising
behaviour disappears. In the second scenario in which the firms
first enter into the contract stage and then Stackelberg competition
follows in the second stage, sales-based delegation occurs. If firms
compete in quantities, second mover advantage appears if firms
make simultaneous delegation contracts, while first mover advantage
is recovered if they make sequential contracts. If firms compete in
prices, the results are reversed.
Keywords
Second mover advantage; strategic delegation; strategic complements; strategic substitutes
Hrčak ID:
182560
URI
Publication date:
1.12.2017.
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