Delegation and Limited Liability in a Modern Capitalistic Economy

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

No 87, Discussion Paper Series from School of Economics, Kwansei Gakuin University

Abstract: We examine an effect of limited liability on strategic delegation in a Cournot duopoly with demand uncertainty. We establish that owners of each firm always delegate their tasks, decisions, and responsibility to a manager under limited liability, while they do not always do so under unlimited liability. This result is consistent with the fact that separation of ownership and management as well as limited liability prevail in many modern large companies.

Keywords: limited liability; delegation; managerial incentives; and Cournot duopoly (search for similar items in EconPapers)
JEL-codes: G32 L12 L13 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2012-04, Revised 2012-04
New Economics Papers: this item is included in nep-bec, nep-cfn and nep-com
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:kgu:wpaper:87

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