Strategic delegation in an experimental mixed duopoly

We provide the first experimental test of the consequences of delegation in a mixed duopoly. Such delegation allows a profit maximizing private owner and a welfare maximizing public owner to weight sales in managerial contracts. Theory predicts that such contracts improve welfare. Our evidence indicates that both public and private subject owners do provide a weight on sales consistent with the subgame perfect equilibrium. Critically, however, this emerges in the experiment only when playing with a robot manager and when playing with a human subject manager after the experience of playing with a robot manager.

► We provide the first experimental test of strategic delegation in a mixed duopoly. ► The test confirms the theoretical subgame perfect equilibrium of the delegation game. ► This confirmation depends on owners gaining experience playing with robot managers.