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- Delegation And Endogenous Mergers In Oligopoly

Author

Listed:
  • Javier M. López Cuñat

    (Universidad de Alicante)

  • Miguel González-Maestre

    (Universidad Autónoma de Barcelona)

Abstract

In this paper we consider the interactions between the use of strategic delegation and mergers in the context of a Cournot oligopoly with linear demand and cost functions. It is assumed that, after the merging process is completed, the owner of every independent firm decides its managerial incentive for his manager. In the context of endogenous mergers through acquisitions, we show that the incentive to merge, under delegation, is considerably increased with respect to the setting without delegation. In fact, we prove that the level of welfare in the setting with delgation is, in some cases, lower than the corresponding under non delegation.

Suggested Citation

  • Javier M. López Cuñat & Miguel González-Maestre, 1999. "- Delegation And Endogenous Mergers In Oligopoly," Working Papers. Serie AD 1999-01, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:1999-01
    as

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    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-1999-01.pdf
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    References listed on IDEAS

    as
    1. Morton I. Kamien & Israel Zang, 1987. "The Limits of Monopolization Through Acquisition," Discussion Papers 754, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    2. Ramon Faulí‐Oller & Massimo Motta, 1996. "Managerial Incentives for Takeovers," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 5(4), pages 497-514, December.
    3. Stephen W. Salant & Sheldon Switzer & Robert J. Reynolds, 1983. "Losses From Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(2), pages 185-199.
    4. Vickers, John, 1985. "Delegation and the Theory of the Firm," Economic Journal, Royal Economic Society, vol. 95(380a), pages 138-147, Supplemen.
    5. Fershtman, Chaim & Judd, Kenneth L, 1987. "Equilibrium Incentives in Oligopoly," American Economic Review, American Economic Association, vol. 77(5), pages 927-940, December.
    6. Steven D. Sklivas, 1987. "The Strategic Choice of Managerial Incentives," RAND Journal of Economics, The RAND Corporation, vol. 18(3), pages 452-458, Autumn.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. repec:cdl:ucsbec:10-00 is not listed on IDEAS
    2. repec:fth:calaec:10-00 is not listed on IDEAS
    3. Lommerud, Kjell Erik & Straume, Odd Rune & Sørgard, Lars, 2000. "Merger Profitability in Unionized Oligopoly," University of California at Santa Barbara, Economics Working Paper Series qt9736w3k9, Department of Economics, UC Santa Barbara.
    4. Gonzalez-Maestre, Miguel & Lopez-Cunat, Javier, 2001. "Delegation and mergers in oligopoly," International Journal of Industrial Organization, Elsevier, vol. 19(8), pages 1263-1279, September.

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