Delegation study in asymmetric game

Kai Zhao ()

Economia Politica: Journal of Analytical and Institutional Economics, 2015, vol. 32, issue 2, 244 pages

Abstract: This paper distinguishes between two types of delegation: Partial Delegation and Full Delegation, in the context of both spillovers and product differentiation endogenously determined by firms. By studying all possible (symmetric and asymmetric) scenarios, we demonstrate that there are three Nash equilibrium strategy profiles for this delegation game, the Pareto optimal solution is that both firms choose Partial Delegation. Partial Delegation can increase the product variety, foster firms to spend more on R&D, encourage firms to produce high-quality goods, and increase the price and profit. However, it may decrease welfare and hurt consumers’ interests. Consequently, in private view, firms prefer Partial Delegation, but in public view, Full Delegation should be encouraged. Copyright Springer International Publishing Switzerland 2015

Keywords: Endogenous spillovers; Full Delegation; Partial Delegation; O31; L13; L20; D43 (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1007/s40888-015-0012-0

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