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Prisoner dilemma in a vertical duopoly with managerial delegation
Author(s) -
Colombo Stefano
Publication year - 2022
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.3468
Subject(s) - cournot competition , duopoly , delegate , delegation , dilemma , prisoner's dilemma , competition (biology) , microeconomics , quality (philosophy) , economics , industrial organization , business , game theory , management , computer science , ecology , philosophy , epistemology , biology , programming language
We consider managerial delegation with two firms producing goods of different qualities. We show that both firms choose to delegate in equilibrium, but a prisoner dilemma is not inevitable in the case of Cournot competition. Indeed, when the quality asymmetry is sufficiently large, the profits of the high‐quality firm are greater than in the case of no delegation.