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Choice of flexible production technologies under strategic delegation

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  • Bárcena-Ruiz, Juan Carlos
  • Olaizola, Norma

Abstract

This paper analyzes a managerial delegation model in which firms can choose between a flexible production technology which allows them to produce two different products and a dedicated production technology which limits production to only one product. We analyze whether the incentives to adopt the flexible technology are smaller or greater in a managerial delegation model than under strict profit maximization. We obtain that the asymmetric equilibrium in which only one firm adopts the flexible technology can be sustained under strategic delegation but not under strict profit maximization when products are substitutes. We extend the analysis to consider welfare implications.

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  • Bárcena-Ruiz, Juan Carlos & Olaizola, Norma, 2008. "Choice of flexible production technologies under strategic delegation," Japan and the World Economy, Elsevier, vol. 20(3), pages 395-414, August.
    • Handle: RePEc:eee:japwor:v:20:y:2008:i:3:p:395-414
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    1. Juan Carlos Bárcena‐Ruiz & Norma Olaizola, 2006. "Cost‐Saving Production Technologies And Strategic Delegation," Australian Economic Papers, Wiley Blackwell, vol. 45(2), pages 141-157, June.

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