CEO bias and product substitutability in oligopoly games

Schroeder, Elizabeth; Tremblay, Carol Horton; Tremblay, Victor J.

doi:doi:10.3390/g13020028

Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/257604

Title:

CEO bias and product substitutability in oligopoly games

Authors:

Schroeder, Elizabeth
Tremblay, Carol Horton
Tremblay, Victor J.

Year of Publication:

2022

Citation:

[Journal:] Games [ISSN:] 2073-4336 [Volume:] 13 [Issue:] 2 [Article No.:] 28 [Publisher:] MDPI [Place:] Basel [Year:] 2022 [Pages:] 1-23

Publisher:

MDPI, Basel

Abstract:

We investigate why a firm might purposefully hire a chief executive officer (CEO) who under- or over-estimates the degree of substitutability between competing products. This counterintuitive result arises in imperfect competition because CEO bias can affect rival behavior and the intensity of competition. We lay out the conditions under which it is profitable for owners to hire biased managers. Our work shows that a universal policy that effectively eliminates such biases need not improve social welfare.

Subjects:

behavioral economics
Bertrand model
Cournot model
Cournot-Bertrand model
firm objectives

Persistent Identifier of the first edition:

doi:10.3390/g13020028

Creative Commons License: