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Strategic incentives for market share

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  • Ritz, Robert A.

Abstract

Market share objectives are prominent in many industries, especially where managers pay much attention to league table rankings. This paper explores the strategic rationale for giving managers incentives based on market share, motivated by evidence from executive compensation practice in the automotive and investment banking industries. Strategic incentives for market share dominate the well-known sales revenue contracts analyzed in much of the literature, but perhaps surprisingly also lead to less competitive outcomes. The more general lesson is that, when competing in strategic substitutes, players will wish to commit to aggressive conduct, but also make their behaviour less manipulable by rivals.

Suggested Citation

  • Ritz, Robert A., 2008. "Strategic incentives for market share," International Journal of Industrial Organization, Elsevier, vol. 26(2), pages 586-597, March.
    • Handle: RePEc:eee:indorg:v:26:y:2008:i:2:p:586-597
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    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment

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