Competition within firms

Lisa Bruttel and Simeon Schudy

No 62, TWI Research Paper Series from Thurgauer Wirtschaftsinstitut, Universität Konstanz

Abstract: We investigate the role of incentives set by a parent firm for competition among its subsidiaries. In a Cournot experiment four subsidiaries of the same parent operate in the same market. Parents earn a specific share of the joint profit and can choose how to distribute the remaining surplus (or loss). Results show that parents allocating profits equally among their subsidiaries reach outcomes close to collusion. However, almost half of the parent firms employ a proportional sharing rule instead. These groups end up with profits around the Cournot level.

Keywords: Cournot Competition; Subsidiary; Subcompany; Experiment (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-bec, nep-com, nep-cse and nep-exp
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Related works:
Journal Article: COMPETITION WITHIN FIRMS (2012)
Working Paper: Competition within firms (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:twi:respas:0062

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