Price competition and managerial delegation under partial cooperation

Kazuhiro Ohnishi

MPRA Paper from University Library of Munich, Germany

Abstract: This paper analyzes a three-stage Bertrand duopoly with partial cooperation and managerial delegation. In the first stage, each owner decides whether to hire a manager. In the second stage, owners who hire managers select their managers’ incentive parameters. In the third stage, managers—or owners if no delegation occurs—simultaneously and independently set the firms’ prices. The equilibrium is derived using backward induction under a subgame perfect equilibrium. As a result, the paper shows that managerial delegation does not increase payoffs for either firm. This finding contrasts sharply with the Cournot case, where delegation is profitable, and highlights that the strategic value of delegation depends critically on the mode of competition.

Keywords: Bertrand model; Managerial delegation; Partially cooperating firm; Subgame perfection (search for similar items in EconPapers)
JEL-codes: C72 D21 D43 L13 (search for similar items in EconPapers)
Date: 2026-06-05
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