COMPETITION WITHIN FIRMS

Lisa Bruttel and Simeon Schudy

Journal of Competition Law and Economics, 2012, vol. 8, issue 1, 167-185

Abstract: We investigate the role of incentives set by a parent firm for competition among its subsidiaries. In a Cournot experiment, four subsidiaries of the same parent operate in the same market. Parents earn a specific share of the joint profit, and can choose how to distribute the remaining surplus (or loss). Results show that parents allocating profits equally among their subsidiaries reach outcomes close to collusion. However, almost half of the parent firms employ a proportional sharing rule instead. These groups end up with profits around the Cournot level.

JEL-codes: C92 D43 K21 L22 (search for similar items in EconPapers)
Date: 2012
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Related works:
Working Paper: Competition within firms (2012)
Working Paper: Competition within firms (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:oup:jcomle:v:8:y:2012:i:1:p:167-185.

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Journal of Competition Law and Economics is currently edited by Nicholas Economides, Amelia Fletcher, Michal Gal, Damien Geradin, Ioannis Lianos and Tommaso Valletti

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