Relative Performance Evaluation, Risk Aversion and Entry
AbstractWe study the relations between compensation schemes and risk aversion of managers in a strategic framework. We first show that the use of relative performance evaluation (RPE) in compensation contracts reduces the equilibrium profits of Cournot firms if managers are not too risk averse. Second, we introduce entry issues in our model. We then show that forbidding RPE can favour competition.
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Bibliographic InfoPaper provided by Luxembourg School of Finance, University of Luxembourg in its series LSF Research Working Paper Series with number 07-07.
Date of creation: 2007
Date of revision:
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Executive Compensation; Relative Performance Evaluation; Moral Hazard; Market Structure.;
Find related papers by JEL classification:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
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