Optimal Compensation Structure in Consumer Cooperatives under Mixed Oligopoly
AbstractThe main aim of this paper is to derive properties of an optimal compensation scheme for consumer cooperatives (Coops) in situations of strategic interaction with profitmaximizing firms (PMFs). Our model provides a reason why Coops are less prone than PMFs to pay variable bonuses to their managers. We show that this occurs under price competition when in equilibrium the Coop prefers to pay a straight salary to its manager whereas the profit-maximizing rival adopts a variable, high-powered incentive scheme. The main rationale is that, due to consumers’ preferences, a Coop is per se highly expansionary in term of output and, therefore, does not need to provide strong strategic incentives to their managers to expand output aggressively by undercutting its rival.
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Bibliographic InfoPaper provided by Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza" in its series DIS Technical Reports with number 2012-06.
Date of creation: 2012
Date of revision:
Other versions of this item:
- Michael Kopel & Marco Marini, 2012. "Optimal Compensation Structure In Consumer Cooperatives Under Mixed Oligopoly," Working Papers 0512, CREI Università degli Studi Roma Tre, revised 2012.
- C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
- C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-14 (All new papers)
- NEP-BEC-2012-07-14 (Business Economics)
- NEP-CTA-2012-07-14 (Contract Theory & Applications)
- NEP-HRM-2012-07-14 (Human Capital & Human Resource Management)
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