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Strategic incentives for market share

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Author Info
Robert Ritz
Abstract

Market share objectives are prominent in many industries, especially where managers pay much attention to league table rankings. This paper explores the strategic rationale for giving managers incentives based on market share in an oligopoly competing in strategic substitutes. Moreover, the paper discusses evidence on executive compensation practice in the automotive and investment banking industries. As predicted by the theory, firms in both industries use explicit contractual incentives based on market share. The profitability squeeze in the US car industry due to aggressive buyer discount programs can thus be understood as a consequence of prevailing management incentives.

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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 248.

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Date of creation: 2005
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Handle: RePEc:oxf:wpaper:248

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Related research
Keywords: Strategic Delegation Market Share Executive Compensation League Tables

Find related papers by JEL classification:
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment

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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.:
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  7. Steven D. Sklivas, 1987. "The Strategic Choice of Managerial Incentives," RAND Journal of Economics, The RAND Corporation, vol. 18(3), pages 452-458, Autumn. [Downloadable!] (restricted)
  8. Fauli-Oller, R & Motta, M, 1996. "Managerial Incentives for Takeovers," Papers 96-22, Valencia - Instituto de Investigaciones Economicas.
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  9. Klemperer, Paul D & Meyer, Margaret A, 1989. "Supply Function Equilibria in Oligopoly under Uncertainty," Econometrica, Econometric Society, vol. 57(6), pages 1243-77, November. [Downloadable!] (restricted)
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  11. Fershtman, Chaim & Judd, Kenneth L, 1987. "Equilibrium Incentives in Oligopoly," American Economic Review, American Economic Association, vol. 77(5), pages 927-40, December. [Downloadable!] (restricted)
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  12. Jansen,Thijs & Lier,Arie,van & Witteloostuijn,Arjen,van, 2004. "Strategic Delegation In Oligopoly: The Market Share Case," Research Memoranda 051, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization. [Downloadable!]
  13. Levent Kockesen & Efe A. Ok, 2004. "Strategic Delegation By Unobservable Incentive Contracts," Review of Economic Studies, Blackwell Publishing, vol. 71(2), pages 397-424, 04. [Downloadable!] (restricted)
    Other versions:
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  1. Constantine Manasakis & Evangelos Mitrokostas & Emmanuel Petrakis, 2007. "Endogenous Strategic Managerial Incentive Contracts," Working Papers 0706, University of Crete, Department of Economics. [Downloadable!]
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