Narrow Results

In this paper, the competition of dynamic oligopoly in the cruise line industry is modeled as an N-person nonzero-sum noncooperative dynamic game where a finite number of cruise lines compete to maximize their profits over a fixed planning horizon. The noncooperative Nash equilibrium capacity investment strategies of cruise lines are theoretically analyzed under the open-loop and closed-loop information structures. The optimality conditions for open-loop and closed-loop Nash equilibrium solutions are derived using a Pontryagin-type maximum principle and given economic interpretations so as to demonstrate the differences between the open-loop and closed-loop Nash equilibrium solutions. The dynamic oligopolistic competition of three cruise lines in a hypothetical setting is numerically analyzed by using the iterative algorithms for open-loop and closed-loop models. Numerical results provide a number of important managerial guidelines for cruise capacity investment decisions. The paper concludes with a discussion on future research directions.

This paper studies the commitment value of delegation in a model of dynamic competition. We argue that separating ownership and control delivers an instantaneous first-mover advantage. Thus, delegation would enable an oligopolistic firm to increase its equilibrium profit relative to direct management. We focus on remuneration strategies that provide managers with intertemporal production incentives: future wages depend on current effort. Their composition and functional form are endogenously determined by the requirement for Markov perfection. For the case of linear-quadratic payoffs, we obtain a closed-form solution for the equilibrium wage strategies which is independent of industry structure.

We examine sales and leasing of a durable good in an asymmetric duopoly. We show that the inefficient firm leases more than the efficient firm, and that an increase in unit costs implies a higher ratio of leased units to sales.