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Strategic Delegation with Multiproduct Firms
Author(s) -
MonerColonques Rafael,
SempereMonerris José J.,
Urbano Amparo
Publication year - 2004
Publication title -
journal of economics and management strategy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.672
H-Index - 68
eISSN - 1530-9134
pISSN - 1058-6407
DOI - 10.1111/j.1430-9134.2004.00017.x
Subject(s) - delegation , delegate , competition (biology) , business , industrial organization , product (mathematics) , externality , microeconomics , compromise , economics , computer science , management , ecology , geometry , mathematics , biology , programming language , social science , sociology
This paper shows that a multiproduct firm may find it optimal not to delegate the sales of all products and therefore to employ different distribution channels for different products. It faces the following trade‐off: There is a strategic effect associated with delegation, but if both products' sales are delegated, intrafirm competition is not internalized. By delegating the sales of just one of the products while selling the other product directly—partial delegation—the multiproduct manufacturer strikes just the right compromise: The externalities between its owns products are internalized partially while a strategic advantage is achieved against its rival single‐product manufacturer. Partial delegation also holds if both products are sold by a common retailer; it dominates full delegation when both manufacturers are multiproduct firms .