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Combining the Endogenous Choice of the Timing of Setting the Levels of Strategic Contracts and Their Contents in a Managerial Mixed Duopoly

Yasuhiko Nakamura ()
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Yasuhiko Nakamura: Nihon University

Journal of Industry, Competition and Trade, 2019, vol. 19, issue 2, 235-261

Abstract: Abstract This study considers a game in which both, the timing of setting the levels of strategic contracts and their contents, are endogenized in a managerial mixed duopoly composed of a public firm with a welfare-maximizing owner and a private firm with a profit-maximizing owner. We suppose that the managers of both, the public firm and the private firm, adopt sales delegation contracts that are equal to the weighted sum of their profits and sales revenue with respect to the incentive parameters. We show that the market structure such that the manager of the public firm with a quantity contract is the follower and the manager of the private firm with a price contract is the leader can become the unique equilibrium market structure in the game in which both, the timing of setting the levels of strategic contracts and their contents, are endogenized in a managerial mixed duopoly. In addition, highest social welfare can be achieved in such a unique equilibrium market structure. Therefore, it is not necessary for the relevant authority, including the government, to regulate free decisions on the timing of the levels of the strategic contracts for the owners of both, the public firm and the private firm.

Keywords: Cournot competition; Bertrand competition; Endogenous competition; Endogenous timing; Mixed duopoly; Managerial delegation (search for similar items in EconPapers)
JEL-codes: L13 D43 D21 (search for similar items in EconPapers)
Date: 2019
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