Strategic Delegation of Indebted Firms in a Duopoly with Uncertain Demand

Tetsuya Shinkai (), Takao Ohkawa, Makoto Okamura () and Kozo Harimaya
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Makoto Okamura: Faculty of Economics, Hiroshima University

No 135, Discussion Paper Series from School of Economics, Kwansei Gakuin University

Abstract: We examine an effect of strategic delegation on the competition behavior of indebted firms and welfare in a Cournot duopoly with demand uncertainty. We establish that the owners of each firm delegate their tasks and decisions to a manager when the demand is sufficiently large but one firm chooses no delegation and the other chooses delegation when the demand is small. This result is consistent with the duopoly competition example between the Mitsui Gomei Kaisya and Suzuki & Co. from the late Meiji era to Taisho era in Japan.

Keywords: indebted firms; delegation; managerial incentives; and Cournot duopoly (search for similar items in EconPapers)
JEL-codes: G32 L12 L13 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2015-09, Revised 2015-09
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-com and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:kgu:wpaper:135

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