An Economic Theory of Managerial Firms

Luca Lambertini is full professor of Economics at the University of Bologna, Italy. He was previously the Head of the Department of Economics of the same University and member of the Executive Committee of EARIE (European Association for Research in Industrial Economics).

1 The theory of managerial firms: setting the stage

1.1 Of firms and markets

1.2 U-form vs M-form, and opportunistic behaviour

1.3 Asset specificity, moral hazard and vertical integration

1.4 What does a firm maximize?

1.4.1 The theory of the growth of the firm

1.5 Agency theory

1.5.1 Moral hazard in teams

1.6 Market competition and incentives

2 Strategic delegation in oligopoly

2.1 Sales expansion

2.1.1 Cournot competition

2.1.2 Bertrand competition

2.2 Market shares

2.3 Comparative performance

2.3.1 Cournot competition

2.3.2 Bertrand competition and the mixed case

2.4 All eggs in one basket

2.4.1 Output level vs comparative performance

2.4.2 Market share vs comparative performance

2.4.3 Output level vs market share

2.4.4 The reduced form

2.5 Endogenous timing

2.5.1 Managers choose timing

2.5.2 Owners choose timing

2.6 Entry barriers

2.7 Empirical and experimental evidence

3 Mixed oligopolies

3.1 Strategic delegation and asymmetric information

3.2 Strategic delegation without agency issues

3.3 Delegation and tax policy

4 Collusive behaviour and horizontal mergers

4.1 Stock-based compensation and collusion

4.2 Output-based compensation and collusion

4.2.1 Extension: partial collusion with grim trigger strategies or optimal punishment

4.3 Horizontal mergers

5 Divisionalization and vertical relations

5.1 Vertical separation: supply chain management

5.2 Multidivisional firms

5.2.1 Multidivisionalization with managers

5.2.2 Divisionalization and mergers

6 Innovation and technical progress

6.1 Preliminaries: the principal-agent relationship with R&D

6.2 The persistence of monopoly

6.3 Delegation vs process innovation: a toy model

6.4 Delegation vs process innovation: endogenous R&D

6.4.1 Process innovation

6.4.2 Product innovation

6.5 Process innovation in a managerialized industry

6.6 Technology licensing

6.7 Make or buy?

7 Endogenous product differentiation

7.1 Vertical or horizontal differentiation with convex variable costs

7.1.1 Profit incentives

7.1.2 Managerial incentives

7.1.3 Should firms delegate product design?

7.1.4 Bidimensional product differentiation

7.2 Process innovation and quality improvements

7.2.1 No delegation

7.2.2 Unilateral delegation

7.2.3 Bilateral delegation

7.2.4 The delegation decision

8 Trade and the environment

8.1 International trade

8.1.1 Selling on a third country’s market: export rivalry

8.1.2 Intraindustry trade: import-competing industry

8.1.3 On the equivalence of tariffs and quotas

8.1.4 Comparative profit performance: ex pluribus unum

8.1.5 The market share case

8.2 Polluting emissions and resource exploitation

8.2.1 CSR in mixed oligopolies

8.2.2 Managerial incentives and green innovation

8.3 Supply chains, trade, and pollution

9 Strategic delegation in differential games

9.1 Elements of differential game theory

9.1.1 The state-control system and its properties

9.1.2 The Hamilton–Jacobi–Bellman equation

9.1.3 Closed-loop memoryless information

9.2 A dynamic model of managerial firms’ growth à la Penrose

9.3 Capacity accumulation games

9.3.1 The Solow–Swan game

9.3.2 The Cournot–Ramsey game

9.4 R&D games

9.4.1 Product innovation

9.4.2 Process innovation

9.5 Natural resource extraction