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Aitor Ciarreta
 
''A Note on Strategic Delegation: The Role of Decreasing Returns to Scale''
( 2009, Vol. 29 No.1 )
 
 
We build a model of optimal design of managerial incentive schemes when the production technology exhibits decreasing returns to scale and firms compete à la Cournot. We borrow Fershtman and Judd (1987) and Kräkel (2005) framework. We show how there is a dominant strategy for entrepreneurs to delegate output decisions. Results depend on the degree of diseconomies of scale. We demostrate how for a class of parameters, managers may increase profits through delegation, a result that with constant returns does not hold.
 
 
Keywords:
JEL: L1 - Market Structure, Firm Strategy, and Market Performance: General
L1 - Market Structure, Firm Strategy, and Market Performance: General
 
Manuscript Received : Oct 20 2008 Manuscript Accepted : Mar 11 2009

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