A Note on Managerial Delegation with Asymmetric and Convex Costs

In this note, we investigate if the standard result by the managerial delegation literature, i.e., the sub-game perfect Nash equilibrium is not Pareto-optimal from the firms' viewpoint, still applies when asymmetric and convex costs are introduced into the analysis. In such a framework, the managerial delegation choice still represents a sub-game Nash perfect equilibrium, but the more efficient firm may obtain higher profits provided that the degree of cost asymmetry between firms is sufficiently large.