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Endogenizing managerial delegation: A new result under Nash bargaining and network effects

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  • Marcella Scrimitore

Abstract

We reconsider the endogenous choice of delegation to a manager by two down-stream firms in both a Cournot and a Bertrand vertical market with network effects. An upstream monopolist charges a two-part tariff for a crucial input. By applying the Nash solution in a centralized bargaining, we show that hiring a manager is never an equilibrium under Cournot, regardless of network effects, while it can be the equilibrium choice for firms competing à la Bertrand, depending on the interplay between the network externalities and the degree of product substitutability.

Suggested Citation

  • Marcella Scrimitore, 2019. "Endogenizing managerial delegation: A new result under Nash bargaining and network effects," EERI Research Paper Series EERI RP 2019/15, Economics and Econometrics Research Institute (EERI), Brussels.
    • Handle: RePEc:eei:rpaper:eeri_rp_2019_15
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    File URL: http://www.eeri.eu/documents/wp/EERI_RP_2019_15.pdf
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    Cited by:

    1. Choi Kangsik & Lee Ki-Dong & Lim Seonyoung, 2020. "Managerial Delegation of Competing Vertical Chains with Vertical Externality," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 20(2), pages 1-18, June.

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    More about this item

    Keywords

    Nash bargaining; two-part tariff; strategic delegation; network externalities.;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm

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