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A Note on Managerial Delegation with Asymmetric and Convex Costs
Author(s) -
Fanti Luciano,
Meccheri Nicola
Publication year - 2017
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.2773
Subject(s) - delegation , nash equilibrium , economics , mathematical economics , microeconomics , pareto principle , regular polygon , game theory , symmetric equilibrium , strategy , mathematics , repeated game , equilibrium selection , operations management , management , geometry
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. Copyright © 2015 John Wiley & Sons, Ltd.