Delegation in a vertically differentiated duopoly

Fatima Barros, Isabel Grilo

Research output: Contribution to journalArticlepeer-review

9 Citations (Scopus)


In a context of vertical product differentiation we analyze the effect of delegation on quality levels. We consider a duopoly where firms can delegate the quality-determining activities to an agent. The realization of the random cost associated with the quality level is known, at no cost, by the firm or the agent that undertakes these activities. By delegating, a firm faces an asymmetry of information since the owner cannot observe the realization of the random variable, which is the agent's private information. When one firm delegates and the other does not, we find two equilibria that mimic the full information situation, and two equilibria which display quality levels for the delegating firm lower than the full information ones. When the delegation decision is endogenous there are equilibrium configurations with zero, one and two delegating firms.

Original languageEnglish
Pages (from-to)164-184
Number of pages21
JournalManchester School
Issue number1
Publication statusPublished - Jan 2002


Dive into the research topics of 'Delegation in a vertically differentiated duopoly'. Together they form a unique fingerprint.

Cite this