Strategic delegation in a sequential model with multiple stages

We analyze strategic delegation in a Stackelberg model with an arbitrary number, n, of firms. We show that the n−1 last movers delegate their production decisions to managers whereas the first mover does not. Equilibrium incentive rates are increasing in the order with which managers select quantities. Letting ui denote the equilibrium payoff of the firm whose manager moves in the i-th place, we show that un > u ∗ n−1 > ... > u ∗ 2 > u ∗ 1. We also compare the delegation outcome of our game with that of a Cournot oligopoly and show that the late (early) moving firms choose higher (lower) incentive rates than the Cournot firms.