Competition within firms

Bruttel, L.; Schudy, Simeon (2012): Competition within firms. In: Journal of Competition Law and Economics, Vol. 8, No. 1: pp. 167-185

Abstract

We investigate the role of incentives set by a parent firm for competition among its subsidiaries. In a Cournot experiment, four subsidiaries of the same parent operate in the same market. Parents earn a specific share of the joint profit, and can choose how to distribute the remaining surplus (or loss). Results show that parents allocating profits equally among their subsidiaries reach outcomes close to collusion. However, almost half of the parent firms employ a proportional sharing rule instead. These groups end up with profits around the Cournot level.

• Item Type: Journal article
• Faculties: Economics; Economics > Chairs > Chair of Empirical Economics
• Subjects: 300 Social sciences > 330 Economics
• Language: English