Our product is unique : a note on a delegation game with differentiated products

Clemens Buchen, Sven A. Hartmann, Alberto Palermo

We analyze a Cournot duopoly market with differentiated goods and the separation between ownership and control. We consider a delegation game, for which the owner of a firm hires a manager who acts as if the good has a lower degree of substitutability than it really has. This is so either because managers are biased and perceive the good in this way, or because firms design an incentive scheme accordingly, which leads the manager to act in this way. Both firms rely on delegation. We discuss conditions, which lead one firm to increase its profit implying that the usual result of a prisoners' dilemma is avoided.

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Year of publication:	July 2021
Authors:	Buchen, Clemens ; Hartmann, Sven A. ; Palermo, Alberto
Publisher:	Trier : Institute for Labour Law and Industrial Relations in the European Union (IAAEU)
Subject:	Strategic Delegation \| Managerial Incentives \| Oligopoly \| Oligopol \| Spieltheorie \| Game theory \| Prinzipal-Agent-Theorie \| Agency theory \| Produktdifferenzierung \| Product differentiation \| Leistungsanreiz \| Performance incentive \| Duopol \| Duopoly \| Führungskräfte \| Managers \| Kooperative Führung \| Participative leadership