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| Aitor Ciarreta |
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| ''A Note on Strategic Delegation: The Role of Decreasing Returns to Scale'' |
| ( 2009, Vol. 29 No.1 ) |
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| 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. |
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| Keywords: |
JEL: L1 - Market Structure, Firm Strategy, and Market Performance: General
L1 - Market Structure, Firm Strategy, and Market Performance: General |
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| Manuscript Received : Oct 20 2008 | | Manuscript Accepted : Mar 11 2009 |
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