Strategic delegation under price competition and network effects

Steffen Hoernig

doi:10.1016/j.econlet.2012.06.045

Strategic delegation under price competition and network effects

NOVA School of Business and Economics (NOVA SBE)

Original language	English
Pages (from-to)	487-489
Number of pages	3
Journal	Economics Letters
Volume	117
Issue number	2
DOIs	https://doi.org/10.1016/j.econlet.2012.06.045
Publication status	Published - 1 Nov 2012

Keywords

Network effects
Price competition
Strategic delegation

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10.1016/j.econlet.2012.06.045

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title = "Strategic delegation under price competition and network effects",

abstract = "Fershtman and Judd (1987) and Sklivas (1987) have shown that strategic delegation under price competition makes firm owners choose incentive contracts that induce managers to be soft in order to reduce competitive intensity. We show in a worked-out example that under sufficiently strong network effects this result is reversed, i.e. the mode of strategic delegation in general depends on more variables apart from whether managers' strategies are complements or substitutes.",

keywords = "Network effects, Price competition, Strategic delegation",

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AB - Fershtman and Judd (1987) and Sklivas (1987) have shown that strategic delegation under price competition makes firm owners choose incentive contracts that induce managers to be soft in order to reduce competitive intensity. We show in a worked-out example that under sufficiently strong network effects this result is reversed, i.e. the mode of strategic delegation in general depends on more variables apart from whether managers' strategies are complements or substitutes.

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