Stackelberg leadership and managerial delegation under hyperbolic demand

We revisit the traditional Stackelberg model considering a hyperbolic demand function. We show that, in duopoly, there exists no incentive to acquire leadership or to separate ownership and control by hiring a manager. The reason is that best replies are orthogonal in a complete neighbourhood of the Nash equilibrium. The unilateral incentive either to lead or to hire a manager is restored if the industry is at least triopolistic. This holds irrespective of the specific delegation contract being adopted.