Delegation and endogenous mergers in oligopoly

Resumen

In this paper we consider the interactions between the use of strategic delegation and mergers in the context of a Cournot oligopoly with linear demand and cost functions. It is assumed that, after the merging process is completed, the owner of every independent firm decides its managerial incentive for his manager. In the context of endogenous mergers through acquisitions, we show that the incentive to merge, under delegation, is considerably increased with respect to the setting without delegation. In fact, we prove that the level of welfare in the setting with delgation is, in some cases, lower than the corresponding under non delegation.