Endogenous managerial incentive contracts in a differentiated duopoly, with and without commitment
AbstractIn a differentiated Cournot duopoly, we examine the contracts that firms' owners use to compensate their managers and the resulting output levels, profits and social welfare. If products are either sufficiently differentiated or sufficiently close substitutes, owners use Relative Performance contracts. For intermediate levels of product substitutability, they use Market Share contracts. When owners do not commit over the types of contracts, each type is an owner's best response to his rival's choice. Product substitutability has differential effects on output levels and profits, depending on the configuration of contracts in the industry. Finally, managerial incentive contracts are welfare enhancing if they increase consumers' surplus. Copyright (C) 2010 John Wiley & Sons, Ltd.
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Bibliographic InfoArticle provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.
Volume (Year): 31 (2010)
Issue (Month): 8 (December)
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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976
Other versions of this item:
- Constantine Manasakis & Evangelos Mitrokostas & Emmanuel Petrakis, 2009. "Endogenous managerial incentive contracts in a differentiated duopoly, with and without commitment," Working Papers 0905, University of Crete, Department of Economics.
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
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