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Location Choice and Contract Bargaining

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  • Michael Kopel
  • Mario Pezzino
  • Anna Ressi

Abstract

We study how managerial bargaining power affects outcomes and payoffs in a Hotelling‐type duopoly framework with restricted and unrestricted locations. We show that bargaining power only affects the distribution of the surplus between owners and managers but does not affect the locations, prices, managerial incentives, and consumer welfare. This is in stark contrast to van Witteloostuijn et al. (2007) and related contributions where bargaining power has real effects. We argue that the difference between our irrelevance result and their findings originates from the fact that their approach seems to be based on a behavioral assumption and not on microeconomic principles of owner–manager bargaining. Copyright © 2015 John Wiley & Sons, Ltd.

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  • Michael Kopel & Mario Pezzino & Anna Ressi, 2016. "Location Choice and Contract Bargaining," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 37(2), pages 140-148, March.
    • Handle: RePEc:wly:mgtdec:v:37:y:2016:i:2:p:140-148
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    Cited by:

    1. Leonard F. S. Wang & Domenico Buccella, 2020. "Location decision of managerial firms in an unconstrained Hotelling model," Bulletin of Economic Research, Wiley Blackwell, vol. 72(3), pages 318-332, July.

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