Product Differentiation and Relative Performance Evaluation in an Asymmetric Duopoly

Aditi Sengupta ()

No 708, Departmental Working Papers from Southern Methodist University, Department of Economics

Abstract: In a model of managerial delegation in a duopoly with asymmetric costs, I show that an increase in the intensity of market competition (product differentiation) increases the absolute weight placed on rival's profit (relative performance) in the managerial compensation scheme for both firms and also increases market concentration. The relatively efficient (larger) firm always places higher weight on rival's performance and obtains higher market share.

Keywords: Strategic Delegation; Relative Performance; Managerial Compensation; Oligopoly (search for similar items in EconPapers)
JEL-codes: D43 L13 M52 M21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-com, nep-ind and nep-mic
Date: 2007-09
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