Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/159825
Authors: 
Cellini, Roberto
Lambertini, Luca
Ottaviano, Gianmarco I.P.
Year of Publication: 
2015
Series/Report no.: 
Quaderni - Working Paper DSE 987
Abstract: 
We model an industry in which a discrete number of firms choose the output of their differentiated products deciding whether or not to consider the impact of their decisions on aggregate output. We show that two threshold numbers of firms exist such that: below the lower one there is a unique equilibrium in which all firms consider their aggregate impact as in standard oligopoly; above the higher threshold there is a unique equilibrium in which all firms disregard that impact as in standard monopolistic competition; between the two thresholds there are two equilibria, one in which all firms consider their aggregate impact and the other in which they do not. We then show that our model of strategic inattention is isomorphic to a model of strategic delegation with managerial compensation based on relative profit performance.
JEL: 
D43
L13
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by-nc/3.0/
Document Type: 
Working Paper

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