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CEO Bias and Product Substitutability in Oligopoly Games

Author

Listed:
  • Elizabeth Schroeder

    (Department of Economics, Oregon State University, Corvallis, OR 97331, USA)

  • Carol Horton Tremblay

    (Department of Economics, Oregon State University, Corvallis, OR 97331, USA)

  • Victor J. Tremblay

    (Department of Economics, Oregon State University, Corvallis, OR 97331, USA)

Abstract

We investigate why a firm might purposefully hire a chief executive officer (CEO) who under- or over-estimates the degree of substitutability between competing products. This counterintuitive result arises in imperfect competition because CEO bias can affect rival behavior and the intensity of competition. We lay out the conditions under which it is profitable for owners to hire biased managers. Our work shows that a universal policy that effectively eliminates such biases need not improve social welfare.

Suggested Citation

  • Elizabeth Schroeder & Carol Horton Tremblay & Victor J. Tremblay, 2022. "CEO Bias and Product Substitutability in Oligopoly Games," Games, MDPI, vol. 13(2), pages 1-23, March.
    • Handle: RePEc:gam:jgames:v:13:y:2022:i:2:p:28-:d:784661
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    References listed on IDEAS

    as
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