Browsing by Subject "Industrial management."

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Open Access
Delegation in a duopolistic differentiated goods market with Bertrand competition
(1995) Yıldırım, Hüseyin
The impact of delegation in a firm has been observed by many modern authors. Vickers(1985), Fershtman and Judd(1987), Sklivas(1987) considered the problem as part of positive economic theory whereas Koray and Sertel(1989) treated it as a regulation problem. We examine a similar problem for a duopolistic dilTerentiated good market with Bertrand competition and lengthen the delegation chain to 5 managers. Our findings show that the firms’ profits are monotonically increasing, i.e. there is a positive incentive to redelegate for each firm. Our natural conjecture is that, in the limit, firms reach collusion non-cooperatively.
Open Access
Delegation in a duopolistic differentiated goods market with Cournot competition
(1995) Ünver, Mustafa Utku
We consider the impact of delegation in a Cournotic duopoly with differentiated goods upon the firms’ profit maximization behavior. In an oligopoly, delegation in each firm can be modeled through a specific non-cooperative game. Delegation games in a differentiated goods market with affine demand are studied within the Cournot competition concept where redelegation is permitted in a symmetric duopoly. The following results are demonstrated: The maximand delegated by each primary delegator, i.e. owner of each firm, converges in monotonically decreasing fashion to the true profit function in the absence of delegation costs, and total industry output at the Cournot equilibrium converges in monotonically increasing fashion to some output level. Welfare changes due to redelegation are also considered.
Open Access
Pricing and optimal exercise of perpetual American options with linear programming
(2010) Bozkaya, Efe Burak
An American option is the right but not the obligation to purchase or sell an underlying equity at any time up to a predetermined expiration date for a predetermined amount. A perpetual American option differs from a plain American option in that it does not expire. In this study, we solve the optimal stopping problem of a perpetual American option with methods from the linear programming literature. Under the assumption that the underlying’s price follows a discrete time and discrete state Markov process, we formulate the problem with an infinite dimensional linear program using the excessive and majorant properties of the value function. This formulation allows us to solve complementary slackness conditions efficiently, revealing an optimal stopping strategy which highlights the set of stock-prices for which the option should be exercised. Under two different stock-price movement scenarios (simple and geometric random walks), we show that the optimal strategy is to exercise the option when the stock-price hits a special critical value. The analysis also reveals that such a critical value exists only for some special cases under the geometric random walk, dependent on a combination of state-transition probabilities and the economic discount factor. We further demonstrate that the method is useful for determining the optimal stopping time for combinations of plain vanilla options, by solving the same problem for spread and strangle positions under simple random walks.