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Managers compensation and collusive behaviour under Cournot oligopoly

  • MARINI, Marco


    (ISE, Universita di Urbino, London School of Economics, and Center for Operations Research and Econometrics (CORE), Université catholique de Louvain (UCL))

The aim of the present paper is to show that the existence of a concrete outside option for ï¬rms’ executives can induce, under speciï¬c circumstances, every ï¬rm to adopt restrictive output practises. In particular, the paper characterizes the conditions for which, under Cournot oligopoly, existing ï¬rms behave more collusively than in a standard Cournot model. It is also shown that room exists for perfect and stable collusive agreements amongst ï¬rms. Other interesting ï¬ndings 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 beneï¬cial form of competition policy in that they induce the ï¬rms to behave less collusively in the product market

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 1998002.

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Date of creation: 01 Jan 1998
Date of revision:
Handle: RePEc:cor:louvco:1998002
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  1. repec:bla:restud:v:57:y:1990:i:3:p:369-80 is not listed on IDEAS
  2. Jensen, M.C. & Murphy, K.J., 1988. "Performance Pay And Top Management Incentives," Papers 88-04, Rochester, Business - Managerial Economics Research Center.
  3. Vickers, John, 1985. "Delegation and the Theory of the Firm," Economic Journal, Royal Economic Society, vol. 95(380a), pages 138-47, Supplemen.
  4. Fershtman, Chaim & Judd, Kenneth L, 1987. "Equilibrium Incentives in Oligopoly," American Economic Review, American Economic Association, vol. 77(5), pages 927-40, December.
  5. Feinstein, Jonathan S. & Stein, Jeremy, 1988. "Employee opportunism and redundancy in firms," Journal of Economic Behavior & Organization, Elsevier, vol. 10(4), pages 401-414, December.
  6. repec:bla:restud:v:63:y:1996:i:3:p:375-410 is not listed on IDEAS
  7. Murphy, Kevin J., 1985. "Corporate performance and managerial remuneration : An empirical analysis," Journal of Accounting and Economics, Elsevier, vol. 7(1-3), pages 11-42, April.
  8. Ron Smith & Stefan Szymanski, 1995. "Executive Pay and Performance: The Empirical Importance of the Participation Constraint," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 2(3), pages 485-495.
  9. Dubey, Pradeep & Mas-Colell, Andreau & Shubik, Martin, 1980. "Efficiency properties of strategies market games: An axiomatic approach," Journal of Economic Theory, Elsevier, vol. 22(2), pages 339-362, April.
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