Arbeitspapier

Incentives in supply function equilibrium

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The author analyses delegation in homogenous duopoly under the assumption that the firm-managers compete in supply functions. In supply function equilibrium, managers' decisions are strategic complements. This reverses earlier findings in that the author finds that owners give managers incentives to act in an accommodating way. As a result, optimal delegation reduces per-firm output and increases profits to above-Cournot profits. Moreover, in supply function equilibrium the mode of competition is endogenous. This means that the author avoids results that are sensitive with respect to assuming either Cournot or Bertrand competition.

Language
Englisch

Bibliographic citation
Series: Economics Discussion Papers ; No. 2014-38

Classification
Wirtschaft
Firm Behavior: Empirical Analysis
Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection
Firm Organization and Market Structure
Subject
Delegation
incentives
supply function equilibrium

Event
Geistige Schöpfung
(who)
Vetter, Henrik
Event
Veröffentlichung
(who)
Kiel Institute for the World Economy (IfW)
(where)
Kiel
(when)
2014

Handle
Last update
10.03.2025, 11:42 AM CET

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Object type

  • Arbeitspapier

Associated

  • Vetter, Henrik
  • Kiel Institute for the World Economy (IfW)

Time of origin

  • 2014

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