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Firms’ strategic delegation with heterogeneous consumers

Cong Pan (), DongJoon Lee () and Kangsik Choi ()
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Cong Pan: Kyoto Sangyo University
DongJoon Lee: Osaka Sangyo University
Kangsik Choi: Pusan National University

Journal of Economics, 2020, vol. 131, issue 3, No 1, 199-221

Abstract: Abstract We revisit firms’ strategic delegation in a Cournot game. We consider a market comprising two consumer groups, with either a high or low willingness to pay. In this market, we first consider firms’ identical marginal costs and show that either/both firms’ owners may strategically abandon the delegation option to avoid price collapse. We find three types of delegation decisions with either/both/no firm delegating in equilibrium. We further consider firms’ asymmetric marginal costs and show that the asymmetric equilibrium wherein only the less efficient firm delegates will exist in a wider parameter range, compared to that wherein only the more efficient firm delegates. Moreover, delegation may enable the less efficient firm to achieve a higher profit than her rival.

Keywords: Strategic delegation; Consumer heterogeneity; Market segmentation; Cournot competition (search for similar items in EconPapers)
JEL-codes: L11 L13 L21 M21 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s00712-020-00707-7

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