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Strategic Delegation in Price Competition
Max Planck Institute of Economics, Strategic Interaction Group, Jena, Germany
Department of Business and Economics, University of Tübingen, Tübingen, Germany
Department of Business and Economics, University of Tübingen, Tübingen, Germany
- 1 Max Planck Institute of Economics, Strategic Interaction Group, Jena, Germany
- 2 Department of Business and Economics, University of Tübingen, Tübingen, Germany
- 3 Department of Business and Economics, University of Tübingen, Tübingen, Germany
Theoretical Economics Letters·Volume 02 (2012)·Pages 355–360·Published 1 November 2012·DOI10.4236/tel.2012.24065
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Abstract
We study price competition in heterogeneous markets where price decisions are delegated to agents. Principals implement a revenue sharing scheme to which agents react by commonly charging a sales price. The results of our model exemplify the importance of both intra- and interfirm interactions of principals and agents in competition. We show that price delegation can increase or decrease the firms’ surplus depending on the heterogeneity of the market and the number of agents employed by the firms.
KeywordsStrategic DelegationGency TheoryEvenue Sharing
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