Strategic choice of forward contracts and managerial incentive contracts in a context of Cournot competition
AbstractThis paper analyzes the effects of forward contracts and managerial incentive contracts, which are tools that firms can use to compete strategically with their rivals in an oligopolistic market. The results show that when the two firms produce a homogeneous good, can hire managers and trade forward contracts, in equilibrium they hire managers and none of them negotiate forward contracts. In the case of differentiated goods, when the goods are substitutes, in equilibrium the firms hire managers and do not trade forward contracts; when the goods are complementary, one firm hires a manager and does not negotiate forward contracts whereas the other one does not hire a manager and negotiates forward contracts. The highest social welfare is achieved when the firms use managerial incentive contracts and forward contracts, and the lowest is achieved when the firms do not use these strategic tools. However, the equilibrium social welfare level is suboptimal.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Universidad de Antioquia, Departamento de Economía in its journal LECTURAS DE ECONOMÍA.
Volume (Year): (2012)
Issue (Month): 76 ()
Postal: Lecturas de Economía, Departamento de Economía, Calle 67, 53-108, Medellin 050010, Colombia.
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Allaz Blaise & Vila Jean-Luc, 1993. "Cournot Competition, Forward Markets and Efficiency," Journal of Economic Theory, Elsevier, vol. 59(1), pages 1-16, February.
- Chaim Fershtman & Kenneth L Judd, 1984.
"Equilibrium Incentives in Oligopoly,"
642, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Carlos Andrés Vasco Correa).
If references are entirely missing, you can add them using this form.