STRATEGIC MANAGERIAL DELEGATION IN A MIXED DUOPOLY WITH CAPACITY CHOICE: PARTIAL DELEGATION OR FULL DELEGATION

摘要

In this paper we analyze the capacity choice in a mixed duopoly, considering the separation between ownership and management of firms. We introduce the following two alternatives as each firm's delegation type to its manager: (i) partial delegation-delegating only the quantity setting, and (ii) full delegation-delegating the determination of both capacity and quantity levels. First, we investigate each firm's capacity scale relative to its quantity, given its delegation type. Second, we derive the equilibrium delegation type of each firm under the endogenous decision by its owner. Finally, we consider the effect of privatization on each firm's delegation type and social welfare.