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Quota bonuses as localized sales bonuses

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  • Bakó, Barna
  • Kálecz-Simon, András

Abstract

Managerial bonus schemes and their effects on firm strategies and market outcomes are extensively discussed in the literature. Though quota bonuses are not uncommon in practice, they have not been analysed so far. In this article we compare quota bonuses to profit-based evaluation and sales (quantity) bonuses. In a duopoly setting with independent demand shocks we find that under certain circumstances choosing quota bonuses is a dominant strategy. This may explain the widespread use of quota bonuses in situations where incentive problems are relevant.

Suggested Citation

  • Bakó, Barna & Kálecz-Simon, András, 2016. "Quota bonuses as localized sales bonuses," Corvinus Economics Working Papers (CEWP) 2016/01, Corvinus University of Budapest.
    • Handle: RePEc:cvh:coecwp:2016/01
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    File URL: https://unipub.lib.uni-corvinus.hu/2180/
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    Keywords

    strategic delegation; oligopoly; managerial incentives;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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