Title

Vertical Externality and Strategic Delegation

Abstract

This paper examines the effects of vertical externality generated by the upstream monopoly on the incentives that owners of competing downstream firms give their managers. It is shown that the introduction of the upstream monopoly may have significant effects on the incentive schemes for the downstream firms' managers. In particular, it is shown that in equilibrium, each owner obtains the simple Nash equilibrium outcome regardless of the mode of competition (quantity or price) in the downstream market.

Department(s)

Economics

Keywords and Phrases

Delegation; Duopoly; Managerial delegation

International Standard Serial Number (ISSN)

0143-6570; 1099-1468

Document Type

Article - Journal

Document Version

Citation

File Type

text

Language(s)

English

Rights

© 2002 John Wiley & Sons, Ltd., All rights reserved.

Publication Date

01 Apr 2002

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