English, Article, Journal or magazine article edition: Cost pass-through under delegation Robert A. Ritz

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Bookmark: http://trove.nla.gov.au/version/21375
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Cost pass-through under delegation
Author
  • Robert A. Ritz
Physical Description
  • preprint
Notes
  • The rate of cost pass-through exceeds 50% under strategic delegation of decision-making to managers with sales revenue contracts - regardless of the number of firms in the industry and demand curvature. This contrasts sharply with profit-maximization, for which cost pass-through can take on any positive value. The key intuition is that firms under delegation act as if they faced more rivals than they actually do, thus pushing cost pass-through towards 100%. Cost pass-through with market share contracts is similarly bounded below, and this note also generalizes existing results on equilibrium characterization for this case.
  • Cost Pass-Through, Excise Taxation, Executive Compensation, Market Share, Strategic Delegation
  • RePEc:oxf:wpaper:404
Language
  • English
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