EFFECTS OF ASYMMETRIC INFORMATION WITHIN A FIRM ON OLIGOPOLISTIC MARKET OUTCOMES |
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| Authors: | KOJI ISHIBASHI |
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| Affiliation: | 1. Keio University;2. The paper is an extensively revised version of Chapter 1 of my PhD dissertation submitted to Boston University. I am deeply indebted to Albert Ma for his suggestions and comments. I thank Dirk Bergemann, Shingo Ishiguro, Dilip Mookherjee, Tetsuya Shinkai, Yoshimasa Shirai, Yasunari Tamada, Masatoshi Tsumagari, Makoto Yano, and an anonymous referee for their helpful comments. Robert Rosenthal deserves credit for his generous assistance at the beginning of this research project. Any errors are my own. Part of the work was carried out while I was visiting Boston University;3. their hospitality is very much appreciated. |
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| Abstract: | I analyze the implications of the Laffont–Tirole type agency problems on oligopolistic market outcomes. In the model, a firm's marginal cost is decreasing in managerial effort and is subject to an additive shock. Both managerial effort and the realization of the shock are a manager's private information. A firm first offers a menu of contract to its manager, and then competes in the product market. As in the model of single principal and single agent, the incentive contracts implement efforts that are distorted downward relative to full information. In this model, with multiple agency relationships, an additional source for upward distortion of effort emerges as a result of the interaction in the product market. The results are robust to whether firms compete in price or quantity. |
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| Keywords: | D82 L13 |
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