TITLE:
Biased Managers as Strategic Commitment in a Mixed Duopoly
AUTHORS:
Yasuhiko Nakamura
KEYWORDS:
Strategic Delegation, Biased Expectations, Aggressiveness, Product Market Competition
JOURNAL NAME:
Theoretical Economics Letters,
Vol.4 No.9,
December
16,
2014
ABSTRACT: This paper analyzes a model in which both the owner of a social welfare-maximizing public firm and the owner of an absolute profit-maximizing private firm can hire biased managers for strategic reasons in a mixed duopoly in the contexts of both a price competition and a quantity competition. In this paper, in a mixed duopoly, we show that in the contexts of both a price competition and a quantity competition, the owners of both firms employ more aggressive managers. In particular, in the result obtained in the price competition, the attitude of the manager employed by the owner of the private firm reverses to that obtained in the case of classical strategic delegation works.