67 q1 p1 firm 2s reaction function firm 1s reaction

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Unformatted text preview: consider firm 1 and firm 2 in the simultaneous move Cournot game. Suppose firm 1 hires a CEO and delegates decision-making authority over quantities to the CEO. The firm writes a contract (publicly) to pay the CEO a bonus based only on revenues. • A cleverly designed incentive plan can make a manager act like a Stackelberg leader, even in a simultaneous move game. M&S 452 — Strat and Org c 2008 Scott Schaefer M&S 452 — Strat and Org c 2008 Scott Schaefer M&S 452 — Strat and Org c 2008 Scott Schaefer P2 $25 $38.67 Q∗ = 2 e e e e e e e R1 e e e e e e R1e T e e e R ¡ ¡ ¡ ¡ ¡ ¡ ¡ ¡ $45 $54.67 ¡ Q1 P1 Firm 2’s Reaction Function ¨ ¨¨ ¨ ¡ ¡ ¨ ¨¨ Firm 1’s ¡¡ Reaction ¡¡ Function¡ ¡ ¨ ¡ ¨ ¡ ¨¨ ¨ ¡ ¨ ¨ ¡ ¨¨¡ ¨¨ ¡ ¨ ¡ ¨¨ ¡ ¨¨ ¨ ¡ ¨ ¡ ¨¨ ¨ ¡ ¨ ¨ ¡ ¨ ¡ ¡ ¡ ¡ T 2 Q∗ = 36 3 50 1 E e e e e e e e e e e e e e rr e e rr e e rr e e r e e rr e rr e ere e rr e 26 2 e err 3 e e rr rr e e 2 rr e e rr e e rr e e r e e rr e e rE e e r Q2 26 25 Eclipse of the Public Corporation 27 2...
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