This paper incorporates the relative performance contract as inMiller and Pazgal (2001, 2005) and
examines the equivalence of competition mode in a vertically differentiated product market.
Contrary to Toshimitsu and Jinji (2007), it demonstrates the equivalence of product quality and
social welfare in this delegation game, irrespective of modes of product competition. In addition,
in a three-stage game of quality-delegation-quantity (or price), it shows that the delegation
coefficient is different between high-quality and low-quality firms in an asymmetric vertical
differentiated model, and a high-quality firm makes better use of the delegation than a low-quality
South African Journal of Economics, Vol. 77:4, December 2009