Strategic delegation under cost asymmetry revised

We revisit the Cournot duopoly game with strategic delegation and asymmetric costs of Delbono, Lambertini, and Marattin (2016). In particular, the authors claim that a Prisoner Dilemma always arises. However, we show that, by setting properly the admissible parameter set, if the firms are sufficiently different, the efficient firm is better off when both firms delegate production. Therefore, in contrast with the traditional view, we claim that a Prisoner Dilemma is not an inevitable outcome in a strategic delegation game