IDEAS home Printed from https://ideas.repec.org/a/eee/jeborg/v87y2013icp91-100.html
   My bibliography  Save this article

Strategic delegation in an experimental mixed duopoly

Author

Listed:
  • Du, Ninghua
  • Heywood, John S.
  • Ye, Guangliang

Abstract

We provide the first experimental test of the consequences of delegation in a mixed duopoly. Such delegation allows a profit maximizing private owner and a welfare maximizing public owner to weight sales in managerial contracts. Theory predicts that such contracts improve welfare. Our evidence indicates that both public and private subject owners do provide a weight on sales consistent with the subgame perfect equilibrium. Critically, however, this emerges in the experiment only when playing with a robot manager and when playing with a human subject manager after the experience of playing with a robot manager.

Suggested Citation

  • Du, Ninghua & Heywood, John S. & Ye, Guangliang, 2013. "Strategic delegation in an experimental mixed duopoly," Journal of Economic Behavior & Organization, Elsevier, vol. 87(C), pages 91-100.
    • Handle: RePEc:eee:jeborg:v:87:y:2013:i:c:p:91-100
    DOI: 10.1016/j.jebo.2013.01.006
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167268113000073
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jebo.2013.01.006?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Ochs, Jack & Roth, Alvin E, 1989. "An Experimental Study of Sequential Bargaining," American Economic Review, American Economic Association, vol. 79(3), pages 355-384, June.
    2. Harrison, Glenn W, 1989. "Theory and Misbehavior of First-Price Auctions," American Economic Review, American Economic Association, vol. 79(4), pages 749-762, September.
    3. William C. Merrill & Norman Schneider, 1966. "Government Firms in Oligopoly Industries: A Short-Run Analysis," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 80(3), pages 400-412.
    4. Jorge Fernández-Ruiz, 2009. "Managerial Delegation in a Mixed Duopoly with a Foreign Competitor," Economics Bulletin, AccessEcon, vol. 29(1), pages 90-99.
    5. Barros, Fatima, 1995. "Incentive schemes as strategic variables: An application to a mixed duopoly," International Journal of Industrial Organization, Elsevier, vol. 13(3), pages 373-386, September.
    6. Bhaumik, Sumon Kumar & Dimova, Ralitza, 2004. "How important is ownership in a market with level playing field?: The Indian banking sector revisited," Journal of Comparative Economics, Elsevier, vol. 32(1), pages 165-180, March.
    7. Huck, Steffen & Muller, Wieland & Normann, Hans-Theo, 2004. "Strategic delegation in experimental markets," International Journal of Industrial Organization, Elsevier, vol. 22(4), pages 561-574, April.
    8. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
    9. Neelin, Janet & Sonnenschein, Hugo & Spiegel, Matthew, 1988. "A Further Test of Noncooperative Bargaining Theory: Comment," American Economic Review, American Economic Association, vol. 78(4), pages 824-836, September.
    10. Matsumura, Toshihiro, 1998. "Partial privatization in mixed duopoly," Journal of Public Economics, Elsevier, vol. 70(3), pages 473-483, December.
    11. Bortolotti, Bernardo & Fantini, Marcella & Siniscalco, Domenico, 2004. "Privatisation around the world: evidence from panel data," Journal of Public Economics, Elsevier, vol. 88(1-2), pages 305-332, January.
    12. White, Mark D., 2001. "Managerial incentives and the decision to hire managers in markets with public and private firms," European Journal of Political Economy, Elsevier, vol. 17(4), pages 877-896, November.
    13. Huck, Steffen & Normann, Hans-Theo & Oechssler, Jorg, 1999. "Learning in Cournot Oligopoly--An Experiment," Economic Journal, Royal Economic Society, vol. 109(454), pages 80-95, March.
    14. de Fraja, Giovanni & Delbono, Flavio, 1989. "Alternative Strategies of a Public Enterprise in Oligopoly," Oxford Economic Papers, Oxford University Press, vol. 41(2), pages 302-311, April.
    15. Till Requate & Israel Waichman, 2011. "“A profit table or a profit calculator?” A note on the design of Cournot oligopoly experiments," Experimental Economics, Springer;Economic Science Association, vol. 14(1), pages 36-46, March.
    16. White, Mark D., 2002. "Political manipulation of a public firm's objective function," Journal of Economic Behavior & Organization, Elsevier, vol. 49(4), pages 487-499, December.
    17. Vickers, John, 1985. "Delegation and the Theory of the Firm," Economic Journal, Royal Economic Society, vol. 95(380a), pages 138-147, Supplemen.
    18. Cox, James C. & Walker, Mark, 1998. "Learning to play Cournot duopoly strategies," Journal of Economic Behavior & Organization, Elsevier, vol. 36(2), pages 141-161, August.
    19. Fershtman, Chaim & Judd, Kenneth L, 1987. "Equilibrium Incentives in Oligopoly," American Economic Review, American Economic Association, vol. 77(5), pages 927-940, December.
    20. Steven D. Sklivas, 1987. "The Strategic Choice of Managerial Incentives," RAND Journal of Economics, The RAND Corporation, vol. 18(3), pages 452-458, Autumn.
    21. Binmore, K & Shaked, A & Sutton, J, 1985. "Testing Noncooperative Bargaining Theory: A Preliminary Study," American Economic Review, American Economic Association, vol. 75(5), pages 1178-1180, December.
    22. John S. Heywood & Guangliang Ye, 2009. "Delegation in a mixed oligopoly: the case of multiple private firms," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 30(2), pages 71-82.
    23. Johnson, Eric J. & Camerer, Colin & Sen, Sankar & Rymon, Talia, 2002. "Detecting Failures of Backward Induction: Monitoring Information Search in Sequential Bargaining," Journal of Economic Theory, Elsevier, vol. 104(1), pages 16-47, May.
    24. Drago, Robert & Heywood, John S, 1989. "Tournaments, Piece Rates, and the Shape of the Payoff Function," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 992-998, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Toshihiro Matsumura & Yoshihiro Tomaru, 2015. "Mixed duopoly, location choice, and shadow cost of public funds," Southern Economic Journal, John Wiley & Sons, vol. 82(2), pages 416-429, October.
    2. Bian, Junsong & Li, Kevin W. & Guo, Xiaolei, 2016. "A strategic analysis of incorporating CSR into managerial incentive design," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 86(C), pages 83-93.
    3. Guangliang Ye & Jinhua Zhao, 2016. "Environmental Regulation in a Mixed Economy," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 65(1), pages 273-295, September.
    4. Barreda-Tarrazona, Iván & Georgantzís, Nikolaos & Manasakis, Constantine & Mitrokostas, Evangelos & Petrakis, Emmanuel, 2016. "Endogenous managerial compensation contracts in experimental quantity-setting duopolies," Economic Modelling, Elsevier, vol. 54(C), pages 205-217.
    5. Shaohua Han & John S. Heywood & Guangliang Ye, 2017. "Informative Advertising in a Mixed Oligopoly," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 51(1), pages 103-125, August.
    6. John S. Heywood & Zerong Wang & Guangliang Ye, 2022. "Strategic delegation in an international mixed oligopoly," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 1888-1898, September.
    7. Christoph March, 2019. "The Behavioral Economics of Artificial Intelligence: Lessons from Experiments with Computer Players," CESifo Working Paper Series 7926, CESifo.
    8. Jie Shuai, 2017. "Mixed Duopoly with a Partial-Delegated-Public Firm," Manchester School, University of Manchester, vol. 85(3), pages 339-356, June.
    9. March, Christoph, 2021. "Strategic interactions between humans and artificial intelligence: Lessons from experiments with computer players," Journal of Economic Psychology, Elsevier, vol. 87(C).
    10. HIGASHIDA Keisaku, 2018. "Subsidies to Public Firms and Competition Modes under a Mixed Duopoly," Discussion papers 18001, Research Institute of Economy, Trade and Industry (RIETI).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. John S. Heywood & Guangliang Ye, 2009. "Delegation in a mixed oligopoly: the case of multiple private firms," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 30(2), pages 71-82.
    2. John S. Heywood & Zerong Wang & Guangliang Ye, 2022. "Strategic delegation in an international mixed oligopoly," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 1888-1898, September.
    3. Yasuhiko Nakamura, 2019. "Combining the Endogenous Choice of the Timing of Setting the Levels of Strategic Contracts and Their Contents in a Managerial Mixed Duopoly," Journal of Industry, Competition and Trade, Springer, vol. 19(2), pages 235-261, June.
    4. Corrado Benassi & Alessandra Chirco & Caterina Colombo, 2021. "Efficiency of bilateral delegation in a mixed Cournot duopoly," Metroeconomica, Wiley Blackwell, vol. 72(3), pages 493-508, July.
    5. Corrado Benassi & Alessandra Chirco & Marcella Scrimitore, 2014. "Optimal manipulation rules in a mixed oligopoly," Journal of Economics, Springer, vol. 112(1), pages 61-84, May.
    6. Michael Kopel & Marco Marini, 2014. "Strategic delegation in consumer cooperatives under mixed oligopoly," Journal of Economics, Springer, vol. 113(3), pages 275-296, November.
    7. Axel Sonntag & Daniel John Zizzo, 2015. "Institutional authority and collusion," Southern Economic Journal, John Wiley & Sons, vol. 82(1), pages 13-37, July.
    8. Barreda-Tarrazona, Iván & Georgantzís, Nikolaos & Manasakis, Constantine & Mitrokostas, Evangelos & Petrakis, Emmanuel, 2016. "Endogenous managerial compensation contracts in experimental quantity-setting duopolies," Economic Modelling, Elsevier, vol. 54(C), pages 205-217.
    9. Kadohognon S Ouattara, 2016. "How privatization affects the strategic choice of managerial incentives: the case of international mixed duopoly," Economics Bulletin, AccessEcon, vol. 36(2), pages 1038-1045.
    10. Juan Carlos Barcena-Ruiz, 2010. "Strategic Delegation and Semipublic Firms," Economics Bulletin, AccessEcon, vol. 30(1), pages 744-750.
    11. Johan Willner, 2013. "The welfare impact of a managerial oligopoly with an altruistic firm," Journal of Economics, Springer, vol. 109(2), pages 97-115, June.
    12. João Correia-da-Silva & Joana Pinho, 2018. "Collusion in mixed oligopolies and the coordinated effects of privatization," Journal of Economics, Springer, vol. 124(1), pages 19-55, May.
    13. Kangsik Choi, 2023. "Endogenous organizational form in a multiproduct mixed duopoly," The Japanese Economic Review, Springer, vol. 74(2), pages 279-299, April.
    14. repec:ebl:ecbull:v:12:y:2008:i:28:p:1-10 is not listed on IDEAS
    15. Nakamura, Yasuhiko, 2015. "Endogenous choice of strategic incentives in a mixed duopoly with a new managerial delegation contract for the public firm," International Review of Economics & Finance, Elsevier, vol. 35(C), pages 262-277.
    16. Bian, Junsong & Li, Kevin W. & Guo, Xiaolei, 2016. "A strategic analysis of incorporating CSR into managerial incentive design," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 86(C), pages 83-93.
    17. Yasuhiko Nakamura, 2019. "Endogenous Choice of the Timing of Setting Incentive Parameters and the Strategic Contracts in a Managerial Mixed Duopoly with a Welfare-Based Delegation Contract and a Sales Delegation Contract," Journal of Industry, Competition and Trade, Springer, vol. 19(4), pages 679-737, December.
    18. Kamijo, Yoshio & Tomaru, Yoshihiro, 2014. "The endogenous objective function of a partially privatized firm: A Nash bargaining approach," Economic Modelling, Elsevier, vol. 39(C), pages 101-109.
    19. Nakamura, Yasuhiko, 2019. "Combining the endogenous choice of the timing of setting incentive parameters and the contents of strategic contracts in a managerial mixed duopoly," International Review of Economics & Finance, Elsevier, vol. 59(C), pages 207-233.
    20. Yasuhiko Nakamura, 2020. "Endogenously choosing the timing of setting strategic contracts’ levels and content in a managerial mixed duopoly with welfare-based and sales delegation contracts," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 67(3), pages 363-402, September.
    21. Xing, Mingqing & Lee, Sang-Ho, 2024. "Cross-ownership and green managerial delegation contracts in a mixed oligopoly," Journal of Environmental Economics and Management, Elsevier, vol. 126(C).

    More about this item

    Keywords

    Mixed duopoly; Incentive contract; Experiment markets;
    All these keywords.

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jeborg:v:87:y:2013:i:c:p:91-100. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jebo .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.