Abstract
AbstractThis paper applies an unconstrained Hotelling linear city model to study the effects of managerial delegation on the firms’ location/product differentiation level in a duopoly industry. It is shown that managerial delegation strongly affects firms’ location/product differentiation choice, both in the simultaneous and sequential moves in one of the three‐stage location‐incentive‐pricing game structure of the model. While sequential moves in the location distance/quality differentiation stage decrease the distance among firms, sequential moves in the incentive‐pricing stages increase it. The social welfare consequences are analysed.
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