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Discriminatory input pricing and strategic delegation

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  • Pei-Cheng Liao

    (Department of Accounting, National Taiwan University, Taiwan)

Abstract

This paper examines how discriminatory input pricing by an upstream monopolist affects the incentives that owners of downstream duopolists offer their managers. Regardless of the mode of competition (quantity or price), owners of downstream firms induce their managers to be more profit-oriented and to behave less aggressively when the monopolist is allowed to price-discriminate than when he charges a uniform price. If the monopolist price-discriminates, managerial downstream firms always earn more than owner-managed profit-maximizing firms. However, if the monopolist charges a uniform price, managerial downstream firms earn more than profit-maximizing counterparts under price competition and earn less under quantity competition. Copyright © 2009 John Wiley & Sons, Ltd.

Suggested Citation

  • Pei-Cheng Liao, 2010. "Discriminatory input pricing and strategic delegation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(4), pages 263-276.
    • Handle: RePEc:wly:mgtdec:v:31:y:2010:i:4:p:263-276
    DOI: 10.1002/mde.1476
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    References listed on IDEAS

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    Cited by:

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    2. Xingtang Wang & Leonard F.S. Wang, 2021. "External bargaining versus internal manipulation: A theory of managerial delegation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(1), pages 134-142, January.
    3. Denis Claude & Mabel Tidball, 2020. "Managerial Incentives and Polluting Inputs Under Imperfect Competition," International Series in Operations Research & Management Science, in: Pierre-Olivier Pineau & Simon Sigué & Sihem Taboubi (ed.), Games in Management Science, pages 165-186, Springer.
    4. Leonard F. S. Wang, 2020. "Relative Performance Versus Market Share Delegation in a Vertically Related Market," Arthaniti: Journal of Economic Theory and Practice, , vol. 19(1), pages 16-27, June.
    5. Michael Kopel & Eva Maria Putz, 2021. "Sharing managerial contract information in a vertically related market," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(4), pages 1037-1047, June.
    6. Zheng Wang, 2015. "Delegation and Vertical Externalities," Economics Bulletin, AccessEcon, vol. 35(2), pages 1128-1135.

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