TY - JOUR
T1 - Effects of Asymmetric Information within a Firm on Oligopolistic Market Outcomes
AU - Ishibashi, Koji
N1 - Publisher Copyright:
© 2009, Japanese Economic Association.
PY - 2010/12/1
Y1 - 2010/12/1
N2 - I analyze the implications of the Laffont–Tirole type agency problems on oligopolistic market outcomes. In the model, a firm’s marginal cost is decreasing in managerial effort and is subject to an additive shock. Both managerial effort and the realization of the shock are a manager’s private information. A firm first offers a menu of contract to its manager, and then competes in the product market. As in the model of single principal and single agent, the incentive contracts implement efforts that are distorted downward relative to full information. In this model, with multiple agency relationships, an additional source for upward distortion of effort emerges as a result of the interaction in the product market. The results are robust to whether firms compete in price or quantity.
AB - I analyze the implications of the Laffont–Tirole type agency problems on oligopolistic market outcomes. In the model, a firm’s marginal cost is decreasing in managerial effort and is subject to an additive shock. Both managerial effort and the realization of the shock are a manager’s private information. A firm first offers a menu of contract to its manager, and then competes in the product market. As in the model of single principal and single agent, the incentive contracts implement efforts that are distorted downward relative to full information. In this model, with multiple agency relationships, an additional source for upward distortion of effort emerges as a result of the interaction in the product market. The results are robust to whether firms compete in price or quantity.
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U2 - 10.1111/j.1468-5876.2009.00497.x
DO - 10.1111/j.1468-5876.2009.00497.x
M3 - Article
AN - SCOPUS:84862789249
VL - 61
SP - 488
EP - 506
JO - Japanese Economic Review
JF - Japanese Economic Review
SN - 1352-4739
IS - 4
ER -