Indirect evolution vs. strategic delegation: A comparison of two approaches to explaining economic institutions

Martin Dufwenberg, Werner Güth

Research output: Contribution to journalArticle

17 Scopus citations

Abstract

Two major methods of explaining economic institutions are compared for the case of a homogenous quadratic duopoly market. In the indirect evolutionary approach, sellers may evolve to care for sales, in addition to profit. In the strategic delegation approach, sellers may design incentives so that their agents care for sales. The two approaches model different phenomena, but both allow certain kinds of commitment. We investigate under what circumstances the two approaches lead to similar market outcomes. The results underscore the technical similarities as well as the conceptual differences between the two approaches.

Original languageEnglish (US)
Pages (from-to)281-295
Number of pages15
JournalEuropean Journal of Political Economy
Volume15
Issue number2
DOIs
StatePublished - Jun 1999
Externally publishedYes

Keywords

  • Agency theory
  • C72
  • Commitment
  • D21
  • D43
  • Duopoly market
  • Indirect evolution
  • Strategic delegation

ASJC Scopus subject areas

  • Economics and Econometrics
  • Political Science and International Relations

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