Management contracts and competition in prices or quantities as strategic tools for differentiated duopoly
##plugins.themes.bootstrap3.article.details##
This article analyzes a differentiated duopoly, in which each business use twos strategic tools to compete with its rival: management incentive contracts, and a choice between prices and quantities. Using the non-cooperative game theory, it is found in equilibrium that (i) when the businesses (i) do not hire managers with substitute (complementary) price contracts are the dominant strategy; with complementary items,
quantity (price) contracts become the dominant strategy; (ii) when the companies can choose whether to hire managers for substitute or complementary goods, price contracts are the dominant strategy; (iii) when they can choose whether to hire managers, and agree with consumers, with substituted goods, one of the companies hires a manager and selects quantities, and the other does not hire, and selects quantities or prices; when they are complementary, both hire a manager and choose prices, and (iv) The greatest levels of social welfare is obtained when the businesses do not hire
managers and make price contracts. However, the social welfare associated with the results of equilibrium is, in all cases, lower than optimum.
competition, differentiated duopoly, Nash equilibrium perfect in subsets, incentive contractcompetencia, duopolio diferenciado, equilibrio de Nash perfecto en subjuegos., contratos de incentivosconcorrência, duopólio diferenciado, equilíbrio de Nash perfeito em sub-jogos, contratos de incentivos
Cheng, L. (1985). Comparing Bertrand and Cournot Equilibria: A Geometric Approach. The RAND Journal of Economics, 16 (1), 146-152.
Coase, R. (1937). The nature of the firm. Economica New Series, 4, (16), 386-405.
Cournot, A. (1897). Recherches sur les Principes Mathematiques de la Theorie des Richesses. Paris : Hachette [1838]. N. T. Bacon (trad.), Economic Classics, Macmillan.
Eichberger, J. (1952). Game Theory for Economists. San Diego: Academic Press.
Fershtman, C. (1985). Internal organizations and managerial incentives as strategic variables in competitive environment. International Journal of Industrial Organization, 3, 245-253.
Fershtman, C. and Judd, K. (1987). Equilibrium incentives in oligopoly. American Economic Review, December, 77 (5), 927-940.
Friedman, J. W. (1977). Oligopoly and the Theory of Games. Amsterdam: North Holland.
Jensen, M. C. and Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3, 305-360.
Nicholson, W. (2004). Teoría microeconómica, 8a. ed. Madrid: Editorial Thompson.
Singh, N. and Vives, X. (1984). Price and quantity competition in a differentiated duopoly. The Rand Journal of Economics, 15 (4), 546-554.
Ross, S. (1973). The economic theory of agency: The principal's problem. American Economic Review, 63, 134-139.
Sklivas, S. (1987). The strategic choice of managerial incentives. The Rand Journal of Economics, 18 (3), 452-458.
Torres, S. y Mejía, A. (2006). Una visión contemporánea del concepto de administración: revisión del contexto colombiano. Cuadernos de Administración, 19 (32), 111-133.
Vives, X. (1984). Duopoly information equilibrium: Cournot and Bertrand. Journal of Economic Theory, 34, 71-94.
von Stackelberg, H. (1934). Marktform und Gleichgewicht. Vienna: Springer-Verlag.
Williamson, O. (1991). Comparative economic organization: The analysis of discrete structural alternatives. Administrative Science Quarterly, 36, 269-296.