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- Title
Firms' strategic delegation with heterogeneous consumers.
- Authors
Pan, Cong; Lee, DongJoon; Choi, Kangsik
- Abstract
We revisit firms' strategic delegation in a Cournot game. We consider a market comprising two consumer groups, with either a high or low willingness to pay. In this market, we first consider firms' identical marginal costs and show that either/both firms' owners may strategically abandon the delegation option to avoid price collapse. We find three types of delegation decisions with either/both/no firm delegating in equilibrium. We further consider firms' asymmetric marginal costs and show that the asymmetric equilibrium wherein only the less efficient firm delegates will exist in a wider parameter range, compared to that wherein only the more efficient firm delegates. Moreover, delegation may enable the less efficient firm to achieve a higher profit than her rival.
- Subjects
WILLINGNESS to pay; DIRECT costing; BUSINESS enterprises; CONSUMERS
- Publication
Journal of Economics, 2020, Vol 131, Issue 3, p199
- ISSN
0931-8658
- Publication type
Article
- DOI
10.1007/s00712-020-00707-7