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arXiv · 1107.3198

Strategic delegation in a sequential model with multiple stages

Paraskevas V. Lekeas·Giorgos Stamatopoulos
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Abstract

We analyze strategic delegation in a Stackelberg model with an arbitrary number, n, of firms. We show that the n-1 last movers delegate their production decisions to managers whereas the first mover does not. Equilibrium incentive rates are increasing in the order with which managers select quantities. Letting u_i^* denote the equilibrium payoff of the firm whose manager moves in the i-th place, we show that u_n^*>u_{n-1}^*>...>u_2^*>u_1^*. We also compare the delegation outcome of our game with that of a Cournot oligopoly and show that the late (early) moving firms choose higher (lower) incentive rates than the Cournot firms.

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Paraskevas V. Lekeas, Giorgos Stamatopoulos. 2012-02-09. Strategic delegation in a sequential model with multiple stages. https://doi.org/10.1142/s0219198911003039

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