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Managerial delegation under network effects

Author

Listed:
  • Trishita Bhattacharjee

    (Indira Gandhi Institute of Development Research)

  • Rupayan Pal

    (Indira Gandhi Institute of Development ResearchInstitute of Economic Growth)

Abstract

This paper shows that network effects do not have any implication to the nature of the equilibrium strategic managerial delegation under Cournot type quantity competition, unlike as in the case of Bertrand type price competition a la Hoernig (2012). It also shows that delegation of output/price decision to the manager is optimal for the owner even in the case of monopoly in the product market, due to the existence of network effects. The monopolist offers sales-oriented incentive scheme to her manager in equilibrium, if there is network effect.

Suggested Citation

  • Trishita Bhattacharjee & Rupayan Pal, 2013. "Managerial delegation under network effects," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2013-003, Indira Gandhi Institute of Development Research, Mumbai, India.
    • Handle: RePEc:ind:igiwpp:2013-003
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    File URL: http://www.igidr.ac.in/pdf/publication/WP-2013-003.pdf
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    References listed on IDEAS

    as
    1. Fershtman, Chaim & Judd, Kenneth L, 1987. "Equilibrium Incentives in Oligopoly," American Economic Review, American Economic Association, vol. 77(5), pages 927-940, December.
    2. Steven D. Sklivas, 1987. "The Strategic Choice of Managerial Incentives," RAND Journal of Economics, The RAND Corporation, vol. 18(3), pages 452-458, Autumn.
    3. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-440, June.
    4. Hoernig, Steffen, 2012. "Strategic delegation under price competition and network effects," Economics Letters, Elsevier, vol. 117(2), pages 487-489.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Trishita Bhattacharjee & Rupayan Pal, 2013. "Price vs. Quantity in duopoly with strategic delegation: Role of network externalities," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2013-010, Indira Gandhi Institute of Development Research, Mumbai, India.
    2. Luciano Fanti & Domenico Buccella, 2017. "Manager‐Union Bargaining Agenda Under Monopoly and with Network Effects," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 38(6), pages 717-730, September.

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    More about this item

    Keywords

    Strategic delegation; Network effects; Quantity competition; Monopoly;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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