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Managerial optimism and investment choice

Author

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  • Florian Englmaier

    (Department of Economics, University of Munich, Munich, Germany)

Abstract

This paper analyzes whether it might be desirable for a firm to hire an overoptimistic manager to commit to a certain R&D strategy. I consider a Cournot model with an ex-ante R&D stage where firms can invest in cost reduction before product market competition takes place. I show that firms want to hire overoptimistic managers and argue that a manager's type may serve as a substitute for strategic delegation via contracts. Copyright © 2010 John Wiley & Sons, Ltd.

Suggested Citation

  • Florian Englmaier, 2010. "Managerial optimism and investment choice," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(4), pages 303-310.
    • Handle: RePEc:wly:mgtdec:v:31:y:2010:i:4:p:303-310
    DOI: 10.1002/mde.1498
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    References listed on IDEAS

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