Strategic delegation in oligopolistic tournaments |
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Authors: | Matthias Kräkel |
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Institution: | (1) Department of Economics, BWL II, University of Bonn, Adenauerallee 24-42, 53113 Bonn, Germany |
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Abstract: | This paper considers a two-stage game with two owners and two managers. At the first stage, the owners choose a linear combination
of profits and sales as incentives for their managers. At the second stage, the two managers compete in an oligopolistic tournament
against each other. The findings substantially differ from the results for Cournot or Bertrand oligopoly: There exist asymmetric
equilibria where one owner puts a positive weight on sales and the other a negative one, although the structure of the game
is completely symmetric. If the influence of noise vanishes, the owner of the more aggressive firm will even induce sales
maximization to his manager in order to preempt his competitor.
Received: 22 April 2004, Accepted: 25 December 2005
JEL Classification:
L1, M2
I would like to thank the editor Semih Koray, two anonymous referees, Ulf Schiller, Dirk Sliwka, Gunter Steiner, and the participants
of the Microeconomics Seminar of the Humboldt University at Berlin for very helpful comments. Financial support by the Deutsche
Forschungsgemeinschaft (DFG), grant KR 2077/2-3 and SFB/TR 15 ("Governance and the Efficiency of Economic Systems"), is gratefully
acknowledged. |
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Keywords: | Managerial incentives oligopoly strategic delegation tournaments |
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