Table of Contents
Game Theory
Volume 2014 (2014), Article ID 631097, 10 pages
http://dx.doi.org/10.1155/2014/631097
Research Article

Extended Games Played by Managerial Firms with Asymmetric Costs

Department of Applied Economics, National University of Kaohsiung, Kaohsiung 811, Taiwan

Received 5 May 2014; Accepted 26 June 2014; Published 13 July 2014

Academic Editor: X. Henry Wang

Copyright © 2014 Leonard F. S. Wang. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

Both demand and cost asymmetries are considered in oligopoly model with managerial delegation. It shows that (i) both efficient and inefficient firms with delegation have second move advantage under quantity setting and first move advantage under price competition; (ii) the extended games under both quantity and price competition have subgame equilibria. Lastly, the social welfare of all strategy combinations is considered to find that when the efficient firm moves first and the inefficient firm moves second under price competition, the social welfare can be higher than Bertrand case, if the efficiency gap between the two firms is huge.