Publication
Title
Managerial delegation and welfare effects of cost reductions
Author
Abstract
We extend the literature on the welfare effects of cost reductions by developing strategic delegation Cournot oligopoly games with n firms, linear cost and demand functions, and sales bonuses. Our method generalizes Zhao (Int J Ind Organ 19:455469, 2001), and expresses the results in terms of the effects of both small and large cost reductions. We find that the firm exit region with sales delegation is larger than in the classical Cournot duopoly benchmark case. We prove that the likelihood of a welfare loss after a cost reduction by an inefficient firm is higher with sales delegation. We show that repairing the welfare loss from such a cost reduction for any n>2 requires firm exit.
Language
English
Source (journal)
Journal of economics. - Wien
Publication
Wien : 2015
ISSN
0931-8658
Volume/pages
116:1(2015), p. 1-23
ISI
000359654800001
Full text (Publishers DOI)
Full text (publishers version - intranet only)
UAntwerpen
Faculty/Department
Research group
Publication type
Subject
Affiliation
Publications with a UAntwerp address
External links
Web of Science
Record
Identification
Creation 04.09.2015
Last edited 26.03.2017
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