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Managerial Delegation, Cost Asymmetry and Social Efficiency of Entry

Mukherjee, Arijit; Tsai, Yingyi

Authors

Yingyi Tsai



Abstract

This article examines the welfare implications of entry in oligopolistic markets with separation of management from ownership. In the presence of strategic managerial delegation and cost asymmetry, entry is socially insufficient unless the degree of scale economies is large. This result is in stark contrast to those documented in the extant literature. A key feature of our analysis is that a ‘business stealing’ effect (Mankiw & Whinston, 1986) does not arise for the relatively cost‐efficient entrant under managerial delegation. The policy implication emerging from our analysis suggests that entry should be encouraged in industries with strategic managerial delegation, cost asymmetry and not large‐scale economies.

Journal Article Type Article
Publication Date 2014-03
Journal Economic Record
Print ISSN 0013-0249
Publisher Wiley
Peer Reviewed Peer Reviewed
Volume 90
Issue 288
Pages 90-97
APA6 Citation Mukherjee, A., & Tsai, Y. (2014). Managerial Delegation, Cost Asymmetry and Social Efficiency of Entry. Economic Record, 90(288), 90-97. doi:10.1111/1475-4932.12079
DOI https://doi.org/10.1111/1475-4932.12079
Publisher URL https://onlinelibrary.wiley.com/doi/abs/10.1111/1475-4932.12079
Additional Information Date of acceptance is estimated.
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