Cournot–Bertrand comparisons under double managerial delegation contracts with sales and environmental incentives

Abstract

AbstractThis study investigates the effect of consumers' willingness to pay (WTP) for green products on double managerial delegation contracts with sales and environmental incentives. We illustrate that Cournot firms set higher sales and lower environmental incentives than Bertrand firms, yielding higher profits and better environmental performance under Cournot. We also examine an endogenous competition mode and discover that Cournot is an equilibrium when consumers' WTP is low, while the welfare‐inferior Bertrand appears unless consumers' WTP or product substitutability is high. Our finding suggests that antitrust authorities should monitor welfare‐distorting coordination when firms reformulate their strategies for emission‐reduction activities under double managerial delegation contracts.