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Combining the Endogenous Choice of the Timing of Setting the Levels of Strategic Contracts and Their Contents in a Managerial Mixed Duopoly

Combining the Endogenous Choice of the Timing of Setting the Levels of Strategic Contracts and... This study considers a game in which both, the timing of setting the levels of strategic contracts and their contents, are endogenized in a managerial mixed duopoly composed of a public firm with a welfare-maximizing owner and a private firm with a profit-maximizing owner. We suppose that the managers of both, the public firm and the private firm, adopt sales delegation contracts that are equal to the weighted sum of their profits and sales revenue with respect to the incentive parameters. We show that the market structure such that the manager of the public firm with a quantity contract is the follower and the manager of the private firm with a price contract is the leader can become the unique equilibrium market structure in the game in which both, the timing of setting the levels of strategic contracts and their contents, are endogenized in a managerial mixed duopoly. In addition, highest social welfare can be achieved in such a unique equilibrium market structure. Therefore, it is not necessary for the relevant authority, including the government, to regulate free decisions on the timing of the levels of the strategic contracts for the owners of both, the public firm and the private firm. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png "Journal of Industry, Competition and Trade" Springer Journals

Combining the Endogenous Choice of the Timing of Setting the Levels of Strategic Contracts and Their Contents in a Managerial Mixed Duopoly

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References (49)

Publisher
Springer Journals
Copyright
Copyright © 2018 by Springer Science+Business Media, LLC, part of Springer Nature
Subject
Economics; Industrial Organization; Economic Policy; R & D/Technology Policy; European Integration; Microeconomics; International Economics
ISSN
1566-1679
eISSN
1573-7012
DOI
10.1007/s10842-018-0286-3
Publisher site
See Article on Publisher Site

Abstract

This study considers a game in which both, the timing of setting the levels of strategic contracts and their contents, are endogenized in a managerial mixed duopoly composed of a public firm with a welfare-maximizing owner and a private firm with a profit-maximizing owner. We suppose that the managers of both, the public firm and the private firm, adopt sales delegation contracts that are equal to the weighted sum of their profits and sales revenue with respect to the incentive parameters. We show that the market structure such that the manager of the public firm with a quantity contract is the follower and the manager of the private firm with a price contract is the leader can become the unique equilibrium market structure in the game in which both, the timing of setting the levels of strategic contracts and their contents, are endogenized in a managerial mixed duopoly. In addition, highest social welfare can be achieved in such a unique equilibrium market structure. Therefore, it is not necessary for the relevant authority, including the government, to regulate free decisions on the timing of the levels of the strategic contracts for the owners of both, the public firm and the private firm.

Journal

"Journal of Industry, Competition and Trade" – Springer Journals

Published: Oct 11, 2018

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