Commitment in R&D Tournaments via Strategic Delegation to Overoptimistic Managers
AbstractThis paper shows that it is profitable for a firm to hire an overoptimistic manager to commit to a certain investment strategy in an R&D tournament situation. In the unique symmetric equilibrium, all firms delegate to overoptimistic managers, where the optimal degree of overoptimism depends on the riskiness of the tournament. In these situations a managerâ€™s type may serve as a substitute for delegation via contracts. By delegating to overoptimistic managers, firms can escape the rat race nature of R&D tournaments.
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Bibliographic InfoPaper provided by Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems with number 328.
Date of creation: Jul 2010
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Strategic Delegation; Overoptimism; Tournaments;
Other versions of this item:
- Florian Englmaier, 2011. "Commitment in R&D tournaments via strategic delegation to overoptimistic managers," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 32(1), pages 63-69, January.
- J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
- M12 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Personnel Management; Executives; Executive Compensation
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- Rtischev, Dimitry, 2012. "Strategic commitment to pursue a goal other than profit in a Cournot duopoly," MPRA Paper 40891, University Library of Munich, Germany.
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