IDEAS home Printed from https://ideas.repec.org/a/wly/mgtdec/v46y2025i4p2468-2473.html
   My bibliography  Save this article

Bonus Scheme, Managerial Delegation, and Quantity Competition

Author

Listed:
  • Chung‐Hui Chou

Abstract

This note examines if owners would offer a bonus for each unit of output dependent on both firms' output levels in equilibrium and the impacts on market performances. The main contribution is showing that owners may lessen quantity competition more than the standard Cournot by adopting the relative quantity delegation in which they offer an incentive scheme based on profit plus a bonus for each unit of output that decreases in their own output levels but increases in rivals' ones. Consequently, contrary to conventional wisdom, output delegation increases profitability but reduces consumers' surplus.

Suggested Citation

  • Chung‐Hui Chou, 2025. "Bonus Scheme, Managerial Delegation, and Quantity Competition," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 46(4), pages 2468-2473, June.
    • Handle: RePEc:wly:mgtdec:v:46:y:2025:i:4:p:2468-2473
    DOI: 10.1002/mde.4476
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/mde.4476
    Download Restriction: no
    File URL: https://libkey.io/10.1002/mde.4476?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Richard T. Holden, 2005. "The Original Management Incentive Schemes," Journal of Economic Perspectives, American Economic Association, vol. 19(4), pages 135-144, Fall.
    2. Nolan Miller & Amit Pazgal, 2002. "Relative performance as a strategic commitment mechanism," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 23(2), pages 51-68.
    3. Basu, Kaushik, 1995. "Stackelberg equilibrium in oligopoly: An explanation based on managerial incentives," Economics Letters, Elsevier, vol. 49(4), pages 459-464, October.
    4. Jansen, Thijs & van Lier, Arie & van Witteloostuijn, Arjen, 2007. "A note on strategic delegation: The market share case," International Journal of Industrial Organization, Elsevier, vol. 25(3), pages 531-539, June.
    5. Bastiaan M. Overvest & Jasper Veldman, 2008. "Managerial incentives for process innovation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 29(7), pages 539-545.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pei-Cheng Liao, 2014. "Strategic Delegation of Multiple Tasks," Australian Economic Papers, Wiley Blackwell, vol. 53(1-2), pages 77-96, June.
    2. Ya‐chin Wang & Leonard F.s. Wang, 2009. "Equivalence Of Competition Mode In A Vertically Differentiated Duopoly With Delegation," South African Journal of Economics, Economic Society of South Africa, vol. 77(4), pages 577-590, December.
    3. Zhao, Kai & Wu, Wanshu, 2015. "Ambiguity Between Pirate Incentive And Collective Desirability Within Semi-Delegation Pattern," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 56(2), pages 259-279, December.
    4. Werner Neus & Manfred Stadler, 2018. "Common holdings and strategic manager compensation: The case of an asymmetric triopoly," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 39(7), pages 814-820, October.
    5. Chen, Tai-Liang & Yang, Mingjie, 2024. "Brand loyalty, managerial delegation and position choices: Bertrand versus Cournot competition," Regional Science and Urban Economics, Elsevier, vol. 109(C).
    6. Pei-Cheng Liao, 2010. "Discriminatory input pricing and strategic delegation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(4), pages 263-276.
    7. Thijs Jansen & Arie van Lier & Arjen van Witteloostuijn, 2009. "On the impact of managerial bonus systems on firm profit and market competition: the cases of pure profit, sales, market share and relative profits compared," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 30(3), pages 141-153.
    8. Berr, Fabian, 2011. "Stackelberg equilibria in managerial delegation games," European Journal of Operational Research, Elsevier, vol. 212(2), pages 251-262, July.
    9. Bian, Junsong & Li, Kevin W. & Guo, Xiaolei, 2016. "A strategic analysis of incorporating CSR into managerial incentive design," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 86(C), pages 83-93.
    10. Stadler, Manfred & Neus, Werner, 2018. "Cross Holdings and Strategic Manager Compensation. The Case of an Asymmetric Triopoly," VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181534, Verein für Socialpolitik / German Economic Association.
    11. Nakamura, Yasuhiko, 2011. "Bargaining over managerial delegation contracts and merger incentives in an international oligopoly," Research in Economics, Elsevier, vol. 65(1), pages 47-61, March.
    12. Yasuhiko Nakamura, 2011. "Strategic managerial delegation and cross-border mergers," Journal of Economics, Springer, vol. 104(1), pages 49-89, September.
    13. Liang, Wen-Jung & Tseng, Ching-Chih & Wang, Kuang-Cheng Andy, 2011. "Location choice with delegation: Bertrand vs. Cournot competition," Economic Modelling, Elsevier, vol. 28(4), pages 1774-1781, July.
    14. Ya-Chin Wang, 2013. "Optimal R&D Policy and Managerial Delegation Under Vertically Differentiated Duopoly," South African Journal of Economics, Economic Society of South Africa, vol. 81(4), pages 605-624, December.
    15. Yasuhiko Nakamura, 2008. "Bargaining over Managerial Contracts in Delegation Games: The Quadratic Cost Case," Economics Bulletin, AccessEcon, vol. 12(16), pages 1-7.
    16. Fanti, Luciano & Gori, Luca & Sodini, Mauro, 2012. "Nonlinear dynamics in a Cournot duopoly with relative profit delegation," Chaos, Solitons & Fractals, Elsevier, vol. 45(12), pages 1469-1478.
    17. Iván Barreda-Tarrazona & Nikolaos Georgantzís & Constantine Manasakis & Evangelos Mitrokostas & Emmanuel Petrakis, 2012. "Managerial compensation contracts in quantity-setting duopoly," Working Papers 2012/17, Economics Department, Universitat Jaume I, Castellón (Spain).
    18. Kim, Jeong Yeol, 2025. "Delegation and strategic collusion under antitrust policies: An experiment," China Economic Review, Elsevier, vol. 90(C).
    19. Richard Cornes & Jun-ichi Itaya, 2016. "Alternative Objectives in an Oligopoly Model: An Aggregative Game Approach," CESifo Working Paper Series 6191, CESifo.
    20. Fanti, Luciano & Gori, Luca, 2011. "Stability analysis in a Cournot duopoly with managerial sales delegation and bounded rationality," MPRA Paper 33828, University Library of Munich, Germany.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:mgtdec:v:46:y:2025:i:4:p:2468-2473. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www3.interscience.wiley.com/cgi-bin/jhome/7976 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.