Endogenous choice of strategic incentives in a mixed duopoly with a new managerial delegation contract for the public firm ¬リニ

Article history: Received 26 March 2014 Received in revised form 11 October 2014 Accepted 14 October 2014 Available online 24 October 2014 This paper revisits the endogenous choice problemof the strategic contracts in amixed duopoly of one public firm and one managerial private firm, with differentiated goods. This paper considers the situation wherein the separation between ownership and management exists in both the public firm and the private firm. In particular, we focus on a new type of managerial delegation contract in the public firm that is a weighted sum of social welfare and the difference between consumer surplus and producer surplus (sum of each firm's absolute profit). On the other hand, in this paper, the classical sales delegation contract is employed in the private firm. In the above setting, we show that similar to the case wherein both the public firm and the private firm simultaneously use their sales delegation contracts, there does not exist any equilibriummarket structure under the class of pure strategies of both the firms. Thus, even if the government as the owner of the public firm provides to her/his manager a strategic delegation contract such that it is easier to manipulate social welfare, we find that it is likely that the indeterminacy in the equilibrium market structure(s) under the class of pure strategies cannot be resolved. Therefore, in this paper, we conclude that the government must devise another style of managerial delegation contract of the public firm in order to assure the equilibriummarket structure under the pure strategy class. © 2014 Elsevier Inc. All rights reserved. JEL classification: D43 L13