PRIVATE AND SOCIAL GAINS IN DELEGATION AND SEQUENTIAL GAMES WITH HETEROGENEOUS FIRMS

Authors

  • MARCELLA SCRIMITORE

    1. University of Salento, Italy
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    • This is the revised version of an earlier paper which circulated under the title ‘Managerial Incentives and Stackelberg Equilibria in Oligopoly’. I warmly thank Alessandra Chirco for insightful suggestions. I also thank the participants at the ‘IO Workshop: Theory, Empirics and Experiments’ at the University of Salento (2009), the Southern Europe Experimentalist's Team workshop in Marrakech (2010) and University of Verona seminar (2010) for discussion. This paper also benefited from critical comments by the participants at the Australasian Economic Theory Workshop in Melbourne (2010), in particular by Otto Reich who acted as a discussant of this paper. The usual disclaimer applies.


  • Manuscript received 3.8.10; final version received 27.7.11.

Abstract

We investigate both quantity and price competition in two differentiated oligopolistic frameworks in which firms are heterogeneous with respect to the ownership structure, i.e. managerial firms compete against entrepreneurial firms, or to the timing decisions, i.e. leaders compete against followers. We show the circumstances under which delegation and sequential strategies, shown to be equivalent under unilateral delegation (Vickers, The Economic Journal, Vol. 95 (1985), pp. 138–147), enable firms to out-perform their rivals and create scope for welfare gains. The different effects of changes in market structure and the degree of product substitutability on firms' profitability and social welfare are discussed.

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