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.
A Note on Managerial Delegation with Asymmetric and Convex Costs
FANTI, LUCIANO;MECCHERI, NICOLA
2017-01-01
Abstract
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.File in questo prodotto:
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