The resulting equilibrium is closer to rm 1s

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Unformatted text preview: Firms may be able to commit to the Stackelberg-leader-like quantities by delegating decision rights over quantities to someone with different preferences. • Methods for making credible commitments in dynamic games — a major theme in Competitive Strategy (MEC 441). M&S 452 — Strat and Org c 2008 Scott Schaefer M&S 452 — Strat and Org c 2008 Scott Schaefer Strategic Effects of Delegation 23 24 • The CEO’s revenue-maximizing reaction function is shifted outward relative to the firm’s profit-maximizing reaction function. The resulting equilibrium is closer to firm 1’s Stackelberg point. • Differentiate with respect to Q1 and set to zero to get CEO 1’s reaction function: 1 Q1 = 50 − Q2g 2 (100 − Q1 − Q2g )Q1 • The CEO of firm 1 chooses Q1 to maximize 1 Q2 = 45 − Q1 2 • Firm 2’s reaction function is still given by M&S 452 — Strat and Org c 2008 Scott Schaefer • What effect does this arrangement have on the simultaneous move Cournot game? • Re...
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This document was uploaded on 02/20/2014.

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