Strategic Delegation and Mergers in Oligopolistic Contests

Bonn Econ Discussion Papers from University of Bonn, Germany

Abstract: In this paper, we combine the strategic delegation approach of Fershtman-Judd-Sklivas with contets. The results show that besides a symmetric equilibrium there also exist asymmetric equilibria in which one owner induces pure sales maximization to his manager so that all the other firms drop out of the market. If merging is allowed on an initial stage, the resulting merged subgame perfect equilibria show that there is strictly more merging under contest than under Cournot competition. We also compare our findings with the previous results on contest models with delegation and find that the outcomes for the Fershtman-Judd-Sklivas incentive scheme clearly differ. Especially, in our model we have a prisoner`s-dilemma like situation where delegation is individually rational for each owner, but all owners are worse off compared to non-delegation.

Keywords: Strategic Delegation; Mergers; Oligopoly; Contests (search for similar items in EconPapers)
JEL-codes: L1 M2 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mic
Date: Written 2002-01
View list of references View citations in EconPapers

Downloads: (external link)
ftp://web.bgse.uni-bonn.de/pub/RePEc/bon/bonedp/bgse2_2002.pdf (application/pdf)

Related works:
Journal Article: Strategic delegation and mergers in oligopolistic contests (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Access Statistics for this paper

More papers in Bonn Econ Discussion Papers from University of Bonn, Germany
Address: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
Series data maintained by Daniel Park ().