Endogenous Choice of Strategic Variables in an Asymmetric Duopoly with Respect to the Demand Functions that Firms Face

Abstract

This paper examines endogenous choice of firm's strategic variables—i.e. price or quantity contract—in a duopoly in which the demand functions that they face are asymmetric in managerial delegation case with separation between ownership and management. We show that when the degree of asymmetry between the demand functions that the two firms face is low, price and quantity competitions are observed in the equilibrium, whereas when the degree of such asymmetry is high, the two types of market structures in which the strategic variables selected by the two owners are different from each other are observed in the equilibrium.

The impact of the presence of biased managers as strategic commitment on endogenous market structures

“…Nakamura () explored the endogenous choice of the strategic contracts when two firms with sales delegation face asymmetric demand functions à la Choi and Lu (). Most recently, Nakamura () studied the endogenous choices of strategic contracts in a managerial duopoly with bargaining between the owner and manager within each firm over the contents of the managerial delegation contract.…”

Price versus Quantity in a Duopolistic Market with Bargaining over Managerial Delegation Contracts

“…Finally, we mention an issue to be addressed in the future. In this paper, while we supposed the two firms to be symmetric, Nakamura () considered the endogenous choice of a strategic contract by each firm's owner where the two firms face asymmetric demand functions, and consequently, asymmetry in the strategic relations of their market variables . We should confirm whether the results induced under the assumption of symmetric demand functions are robust under the situation when firms face asymmetric demand functions.…”

“…More recently, Chirco and Scrimitore (2013) investigated a differentiated duopoly with and without separation between ownership and management in the fashion of Fershtman and Judd (1087), Sklivas (1987), and Vickers (1985), and they endogenized the firm choice of the strategy variable (price or quantity) to play in the product market in the presence of network externalities à la Katz and Shapiro (1985) and Hoernig (2012) in which the surplus that a firm's client obtains increases directly with the number of other clients of this firm. 1 Most recently, following the approach of Choi and Lu (2012), Nakamura (2015) considered the endogenous choice problem of strategic contracts in a duopoly with separation between ownership and management wherein firms have asymmetric demand functions. In addition, in the context of a mixed duopoly in which a profit-maximizing private firm competes against a welfare-maximizing public firm, Matsumura and Ogawa (2012) investigated the endogenous choice of a strategic variable (price or quantity).…”

Corporate social responsibility focusing on consumer surplus and endogenous competition structure: A case of managerial delegation

“…Recent studies compare Cournot and Bertrand competitions and the endogenous selection of firms' strategies; Alipranti et al (2014) considered a vertically related market and Nakamura (2015) investigated the economic situation in which firms face the asymmetric demand functions. Moreover, Nakamura (2017a) and Nakamura (2017b) explored bargaining over the incentive parameter within each firm's managerial delegation contract between the owner and manager.…”