ABSTRACT
This chapter discusses the role of managers in industries where private and public firms coexist. F. Barros took a look at this problem by combining the strategic nature of delegation borrowed from Vickers, Fershtman and Judd and Sklivas with an informational asymmetry between principals and agents coming straight from agency theory. The industry is a duopoly, with a demand function for a homogeneous good produced through a technology operating at constant returns to scale. The private firm does so aiming at the acquisition of a dominant position; the public one adopts a similar stance to enhance consumer surplus and welfare. The expected social welfare level arising when both firms hire managers is higher than the corresponding expected social welfare generated in absence of managers. What Barros shows is that managers can be useful tools in the hand of the public sector in presence of a proper agency relationship under asymmetric information.
