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 dependant 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:||Dec 1997|
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- 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.
- Marini, Marco A., 1998. "Earnings, Coalitions and the Stability of the Firm," MPRA Paper 70728, University Library of Munich, Germany, revised 2012.
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