External bargaining versus internal manipulation: A theory of managerial delegation

Abstract

Does the competition mode influence the delegation decisions of the firm owners? By constructing a vertical negotiation game model, we find that under Cournot competition in the downstream market, the downstream firm's owner will not choose delegation, whereas under Bertrand competition, the downstream firm's owner will choose delegation. If the product substitution is relatively large, the adoption of delegation management by the owners of downstream firms under Bertrand competition will bring higher profits. It further shows that compared with the situation of no delegation, delegation management may reverse the social welfare ranking under Bertrand and Cournot competitions.

Cross ownership, union bargaining with managerial delegation, and stakeholders conflicts

“…and see that there is conflicting interest between owners and consumers. Compared with Wang et al (2022) The above results are summarized in Proposition 1.…”

“…Cross ownership, union bargaining, and managerial delegation effectively link the relationships of the stakeholders in modern enterprises, which enables us to analyze the conflicts within modern enterprises closer to reality. This paper is related to Le Wang (2018, 2020) and Wang et al (2022), which separately examined the effect of product differentiation, firms' corporate social responsibility activities, and cross-ownership on the conflict between principal stakeholders. This paper is also highly related to Fanti (2013), Mukherjee (2013), Han and Mukherjee (2017), and Buccella (2015Buccella ( , 2019, which separately investigate the effect of cross-ownership, innovation, product differentiation, and strategic trade policies in a unionized industry.…”

Centralized bargaining with pre‐donation in a vertically related industry

“…(2016) studied how demand elasticities of downstream firms affect their profit shares under decentralized bargaining and Yoshida (2018) investigated how the bargaining power of the upstream firm affects the welfare distribution under decentralized bargaining when two downstream firms engage in Cournot competition under different marginal costs of production. More recently, Wang and Li (2020) analyzed the effects of the intensity of (Cournot or Bertrand) competition in the final goods market on the profits of the upstream and downstream firms when they engage in decentralized bargaining over a two‐part tariffs input price, Wang and Wang (2021) studied the incentives of downstream firms for managerial delegation in a vertically related industry under decentralized bargaining over two‐part tariffs, and Constantatos and Pinopoulos (2021) endogenized the choices of the upstream and downstream firms between the linear and two‐part tariffs contracts as a function of their bargaining powers.…”