Network Externalities, Endogenous Managerial Delegation, and Import Tariffs Policy in a Cournot Third-Country Model

Abstract

This paper explores the endogenous managerial delegation choice in a Cournot third-country model with network externalities. Each exporting firm's owner chooses between a sales delegation and a relative-performance delegation contract. It is shown that in a Cournot third-country model with free trade, both owners optimally choose relative performance delegation. In contrast, under discriminatory import tariffs, sales delegation becomes the optimal strategy for both firms.