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Stackelberg leadership and managerial delegation under hyperbolic demand

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  • Delbono, Flavio
  • Lambertini, Luca

Abstract

We revisit the traditional Stackelberg model considering a hyperbolic demand function. We show that, in duopoly, there exists no incentive to acquire leadership or to separate ownership and control by hiring a manager. The reason is that best replies are orthogonal in a complete neighbourhood of the Nash equilibrium. The unilateral incentive either to lead or to hire a manager is restored if the industry is at least triopolistic. This holds irrespective of the specific delegation contract being adopted.

Suggested Citation

  • Delbono, Flavio & Lambertini, Luca, 2023. "Stackelberg leadership and managerial delegation under hyperbolic demand," Economics Letters, Elsevier, vol. 224(C).
    • Handle: RePEc:eee:ecolet:v:224:y:2023:i:c:s0165176523000319
    DOI: 10.1016/j.econlet.2023.111006
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    References listed on IDEAS

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    More about this item

    Keywords

    Strategic delegation; First mover advantage; Hyperbolic demand;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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