Strategic delegation under cost asymmetry

We revisit the two-stage duopoly game with strategic delegation and asymmetric technologies of Sen and Stamatopoulos (2015). We show that their conclusions are misled by the restrictive assumption that the extent of delegation to managers is restricted to a binary set. Allowing for a continuous set of delegation incentives, we prove that the delegation stage is a prisoners’dilemma, the unique subgame perfect equilibrium entailing both …rms hiring managers. At equilibrium, the more e¢ cient …rm makes higher pro…ts. JEL Codes: D43, L13 Keywords: managerial …rms; Cournot competition; prisoners’ dilemma