When an inefficient competitor makes higher profit than its efficient rival

We consider a Cournot duopoly with strategic delegation, where quantities of firms are chosen by their managers. A firm can offer its manager one of the two incentive contracts: the profit incentive or the revenue incentive. We show that in this setting there are Nash equilibria in which an inefficient firm obtains higher profit than its efficient rival. This result continues to hold under a robust set of correlated equilibria.

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Year of publication:	2010-06-16
Authors:	Sen, Debapriya ; Stamatopoulos, Giorgos

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Type of publication:	Book / Working Paper
Language:	English
Notes:	Sen, Debapriya and Stamatopoulos, Giorgos (2010): When an inefficient competitor makes higher profit than its efficient rival.
Classification:	L13 - Oligopoly and Other Imperfect Markets ; L21 - Business Objectives of the Firm ; D43 - Oligopoly and Other Forms of Market Imperfection ; C72 - Noncooperative Games
Source:	BASE

Persistent link: https://www.econbiz.de/10015244849