Vertical externality and strategic delegation

Eun-Soo Park
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Eun-Soo Park: Department of Economics, University of Missouri-Rolla, Rolla, MO 65409-1250, USA, Postal: Department of Economics, University of Missouri-Rolla, Rolla, MO 65409-1250, USA

Managerial and Decision Economics, 2002, vol. 23, issue 3, 137-141

Abstract: This paper examines the effects of vertical externality generated by the upstream monopoly on the incentives that owners of competing downstream firms give their managers. It is shown that the introduction of the upstream monopoly may have significant effects on the incentive schemes for the downstream firms' managers. In particular, it is shown that in equilibrium, each owner obtains the simple Nash equilibrium outcome regardless of the mode of competition (quantity or price) in the downstream market. Copyright © 2002 John Wiley & Sons, Ltd.

Date: 2002
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Persistent link: https://EconPapers.repec.org/RePEc:wly:mgtdec:v:23:y:2002:i:3:p:137-141

DOI: 10.1002/mde.1051

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