Managers compensation and collusive behaviour under Cournot oligopoly
The aim of the present paper is to show that the existence of a concrete outside option for ﬁrms’ executives can induce, under speciﬁc circumstances, every ﬁrm to adopt restrictive output practises. In particular, the paper characterizes the conditions for which, under Cournot oligopoly, existing ﬁrms behave more collusively than in a standard Cournot model. It is also shown that room exists for perfect and stable collusive agreements amongst ﬁrms. Other interesting ﬁndings are also twofold. Firstly, that the equilibrium executives’ pay will usually be dependent upon the number of companies initially disposing of the technology and/or of the organizational knowledge required to set up the business. Secondly, that companies’ procedures difficult to duplicate can constitute a beneﬁcial form of competition policy in that they induce the ﬁrms to behave less collusively in the product market
|Date of creation:||01 Jan 1998|
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