Stackelberg leadership and managerial delegation under hyperbolic demand

Flavio Delbono and Luca Lambertini

Economics Letters, 2023, vol. 224, issue C

Abstract: We revisit the traditional Stackelberg model considering a hyperbolic demand function. We show that, in duopoly, there exists no incentive to acquire leadership or to separate ownership and control by hiring a manager. The reason is that best replies are orthogonal in a complete neighbourhood of the Nash equilibrium. The unilateral incentive either to lead or to hire a manager is restored if the industry is at least triopolistic. This holds irrespective of the specific delegation contract being adopted.

Keywords: Strategic delegation; First mover advantage; Hyperbolic demand (search for similar items in EconPapers)
JEL-codes: D43 L13 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:224:y:2023:i:c:s0165176523000319

DOI: 10.1016/j.econlet.2023.111006

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