Strategic delegation in a sequential model with multiple stages
Computer Science and Game Theory
2012-07-05 v2
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.
Cite
@article{arxiv.1107.3198,
title = {Strategic delegation in a sequential model with multiple stages},
author = {Paraskevas V. Lekeas and Giorgos Stamatopoulos},
journal= {arXiv preprint arXiv:1107.3198},
year = {2012}
}
Comments
To appear in International Game Theory Review (IGTR), Vol. 13, No. 3 (2011) 1-12