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STRATEGIC DELEGATION IN A STACKELBERG GAME WITH MULTIPLE STAGES

Paraskevas Lekeas and Giorgos Stamatopoulos ()

International Game Theory Review (IGTR), 2011, vol. 13, issue 03, 341-352

Abstract: We analyze strategic delegation in a Stackelberg model with an arbitrary number,n, of firms. We show thatn-1firms delegate their production decisions and only one firm (the one whose manager is the first mover) does not. The later a manager commits to a quantity, the higher his incentive rate. Letting$u_i^*$denote the equilibrium payoff of the firm whose manager commits in theith stage, we show that$u_n^*>u_{n-1}^*>\cdots>u_2^*>u_1^*$. We also compare the delegation outcome of our game with that of a corresponding Cournot oligopoly and show that managers who commit late (early) are given higher (lower) incentive rates than managers in the Cournot market.

Keywords: Sequential competition; late-movers' advantage; delegation; D43; L13; L21 (search for similar items in EconPapers)
JEL-codes: B4 C0 C6 C7 D5 D7 M2 (search for similar items in EconPapers)
Date: 2011
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DOI: 10.1142/S0219198911003039

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