Managerial Delegation in Strategic Export Policies

Abstract

This paper examines the implication of the separation of ownership and management based on a strategic export promotion policy under Cournot competition in a third-market model. We elucidate owner’s subsidization effect hidden in the managerial delegation process. Strategic subsidy competition between the governments strengthens both the owners’ subsidization incentives and results in the oversubsidization to the firms. When the firms’ delegation decisions are endogenous, each firm has no incentive to delegate a manager under governments’ commitments to intervene since unilateral delegation leads to Stackelberg follower payoff.