Biased Managers as Strategic Commitment

Englmaier, Florian; Reisinger, Markus

doi:10.1002/mde.2619

Cited by 31 publications

(80 citation statements)

References 25 publications

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“…Strikingly different from Englmaier and Reisinger () and Nakmaura (), we find that the aggressiveness of the manager hired by each firm depends on both the degree of product differentiation and the strength of the network effects in price competition. We obtain the following result.…”

Section: Price Competitioncontrasting

confidence: 99%

“…As indicated in Englmaier and Reisinger () and Nakmaura (), the first result holds because as the value of k i increases, the manager of firm i regards the market size as larger, which implies that a higher price level is optimal. The second result implies that when the manager of firm j regards the market size as too large, it is optimal for the manager of firm i to increase her quantity through strategic complementary between each firm's price level by decreasing the price level of firm i .…”

Section: Price Competitionmentioning

confidence: 81%

“…Similar to Englmaier and Reisinger () and Nakmaura (), the assumption on k i is important. This assumption is related to the expectation that firm i 's manager holds about the demand intercept of firm j , ( i , j = 0, 1; i ≠ j ).…”

Section: Modelmentioning

confidence: 98%

“…In this paper, following Hoernig (), Nakmaura (2013a), and Nakamura (2013b), we suppose that

f ((),, y_{0}, y_{1}) = - n ((), y_{0}^{2} true/ 2 + b y_{0} y_{1} + y_{1}^{2} true/ 2) true/ ((), 1 - b^{2})

. On the other hand, the manager hired by each firm perceives the utility function of the representative consumer as follows:

U ((),;,,,, q_{0}, q_{1}, k_{0}, k_{1}, y_{0}, y_{1}) = m + \frac{a ((), k_{0} q_{0} + k_{1} q_{1})}{1 - b} - \frac{q_{0}^{2} + q_{1}^{2}}{2 ((), 1 - b^{2})} - \frac{b q_{0} q_{1}}{1 - b^{2}} + n \frac{((), y_{0} + b y_{1}) q_{0} + ((), y_{1} + b y_{0}) q_{1}}{1 - b^{2}} + f ((),, y_{0}, y_{1}) .

Thus, following Englmaier and Reisinger () and Nakmaura (), in our model, each firm's manager is potentially biased in the sense that they evaluate the size of the market, a , incorrectly . More precisely, the firms' managers are potentially biased in the sense that they evaluate the size of the market, a , incorrectly.…”

Section: Modelmentioning

confidence: 99%

“…On the other hand, in quantity competition, irrespective of both the degree of product differentiation and the strength of network effects, each firm's owner hires a more aggressive manager than in the case of the duopoly with no network effects, which is strikingly different from price competition. Therefore, particularly in price competition, the result obtained in the standard duopoly without any network effect that was considered in Englmaier and Reisinger () is not robust against the introduction of network effects à la Katz and Shapiro (). In addition, we analyzed the attitude of the manager of each firm in price competition such that the expectation of each firm's manager about the market size and the expectation of the representative consumer of each firm's quantity are restricted.…”

Section: Introductionmentioning

confidence: 99%

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Aggressiveness of Managers in the Market with Network Effects: The Case of Biased Managers as Strategic Commitment

Nakamura

2015

Manage Decis Econ

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This paper analyzes a model wherein firms' owners hire biased managers in a differentiated goods duopoly with network effects. We show that whether firms hire an aggressive manager or not depends on both the degree of product differentiation and the strength of network effects in price competition whereas it does not depend on the degree of product differentiation or the strength of network effects in quantity competition. Thus, the attitudes of firms' managers depend on the type of competition and the relative magnitude of the strength of network effects to the degree of product differentiation.

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Section: Price Competitioncontrasting

confidence: 99%

Section: Price Competitionmentioning

confidence: 81%

Section: Modelmentioning

confidence: 98%

“…In this paper, following Hoernig (), Nakmaura (2013a), and Nakamura (2013b), we suppose that

f ((),, y_{0}, y_{1}) = - n ((), y_{0}^{2} true/ 2 + b y_{0} y_{1} + y_{1}^{2} true/ 2) true/ ((), 1 - b^{2})

. On the other hand, the manager hired by each firm perceives the utility function of the representative consumer as follows:

U ((),;,,,, q_{0}, q_{1}, k_{0}, k_{1}, y_{0}, y_{1}) = m + \frac{a ((), k_{0} q_{0} + k_{1} q_{1})}{1 - b} - \frac{q_{0}^{2} + q_{1}^{2}}{2 ((), 1 - b^{2})} - \frac{b q_{0} q_{1}}{1 - b^{2}} + n \frac{((), y_{0} + b y_{1}) q_{0} + ((), y_{1} + b y_{0}) q_{1}}{1 - b^{2}} + f ((),, y_{0}, y_{1}) .

Section: Modelmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Aggressiveness of Managers in the Market with Network Effects: The Case of Biased Managers as Strategic Commitment

Nakamura

2015

Manage Decis Econ

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Location Choice and Contract Bargaining

2015

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We study how managerial bargaining power affects outcomes and payoffs in a Hotelling‐type duopoly framework with restricted and unrestricted locations. We show that bargaining power only affects the distribution of the surplus between owners and managers but does not affect the locations, prices, managerial incentives, and consumer welfare. This is in stark contrast to van Witteloostuijn et al. (2007) and related contributions where bargaining power has real effects. We argue that the difference between our irrelevance result and their findings originates from the fact that their approach seems to be based on a behavioral assumption and not on microeconomic principles of owner–manager bargaining. Copyright © 2015 John Wiley & Sons, Ltd.

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Better innovators or more innovators? Managerial overconfidence and corporate R&D

2018

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We use 3 measures of managerial overconfidence: the press coverage of chief executive officers, his/her age, and his/her experience in the industry. Our results show that the firms run by overconfident managers actually invest more in R&D expenditures, even after controlling for country, industry, and time factors. Overconfident managers not only spend more on R&D but also amplify the effect of financial determinants of R&D such as firm liquidity or profitability. Nevertheless, overconfident managers do not invest efficiently in R&D, and these expenditures can negatively affect the value of the firm.

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Biased Managers as Strategic Commitment

Cited by 31 publications

References 25 publications

Aggressiveness of Managers in the Market with Network Effects: The Case of Biased Managers as Strategic Commitment

Aggressiveness of Managers in the Market with Network Effects: The Case of Biased Managers as Strategic Commitment

Location Choice and Contract Bargaining

Better innovators or more innovators? Managerial overconfidence and corporate R&D

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