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Strategic delegation in price competition

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  • Güth, Werner
  • Pull, Kerstin
  • Stadler, Manfred

Abstract

We study price competition in heterogeneous markets where price decisions are delegated to agents. Principals implement a revenue sharing scheme to which agents react by commonly charging a sales price. The results of our model exemplify the importance of both intrafirm- and interfirm interactions of principals and agents in competition. We show that price delegation can increase or decrease the firms' surplus depending on the heterogeneity of the market and the number of agents employed by the firms.

Suggested Citation

  • Güth, Werner & Pull, Kerstin & Stadler, Manfred, 2012. "Strategic delegation in price competition," University of Tübingen Working Papers in Business and Economics 43, University of Tuebingen, Faculty of Economics and Social Sciences, School of Business and Economics.
    • Handle: RePEc:zbw:tuewef:43
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    References listed on IDEAS

    as
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    7. Fershtman, Chaim & Judd, Kenneth L, 1987. "Equilibrium Incentives in Oligopoly," American Economic Review, American Economic Association, vol. 77(5), pages 927-940, December.
    8. Krakel, Matthias, 2003. "U-type versus J-type tournaments as alternative solutions to the unverifiability problem," Labour Economics, Elsevier, vol. 10(3), pages 359-380, June.
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    11. Miller, Nolan H & Pazgal, Amit I, 2001. "The Equivalence of Price and Quantity Competition with Delegation," RAND Journal of Economics, The RAND Corporation, vol. 32(2), pages 284-301, Summer.
    12. Fershtman, Chaim, 1985. "Managerial incentives as a strategic variable in duopolistic environment," International Journal of Industrial Organization, Elsevier, vol. 3(2), pages 245-253, June.
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    Cited by:

    1. Güth, Werner & Pull, Kerstin & Stadler, Manfred, 2014. "Delegation, worker compensation, and strategic competition," University of Tübingen Working Papers in Business and Economics 67, University of Tuebingen, Faculty of Economics and Social Sciences, School of Business and Economics.
    2. Max Albert & Andreas Hildenbrand, 2016. "Industrial Organization and Experimental Economics: How to Learn from Laboratory Experiments," Homo Oeconomicus: Journal of Behavioral and Institutional Economics, Springer, vol. 33(1), pages 135-156, August.

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    More about this item

    Keywords

    Strategic delegation; Agency theory; Revenue sharing;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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