External bargaining versus internal manipulation: A theory of managerial delegation

Xingtang Wang and Leonard F.S. Wang

Managerial and Decision Economics, 2021, vol. 42, issue 1, 134-142

Abstract: Does the competition mode influence the delegation decisions of the firm owners? By constructing a vertical negotiation game model, we find that under Cournot competition in the downstream market, the downstream firm's owner will not choose delegation, whereas under Bertrand competition, the downstream firm's owner will choose delegation. If the product substitution is relatively large, the adoption of delegation management by the owners of downstream firms under Bertrand competition will bring higher profits. It further shows that compared with the situation of no delegation, delegation management may reverse the social welfare ranking under Bertrand and Cournot competitions.

Date: 2021
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https://doi.org/10.1002/mde.3218

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Persistent link: https://EconPapers.repec.org/RePEc:wly:mgtdec:v:42:y:2021:i:1:p:134-142

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