Bilateral Delegation, Wage Bargaining and Managerial Incentives: Implications for Efficiency and Distribution
We develop a model of bilateral delegation in wage and employment bargaining to study efficiency and distributional implications in monopoly and in Cournot duopoly. In both markets delegation causes underproduction, but has contrasting implications for bargaining pie and for its distribution. In monopoly the bargaining pie contracts. In duopoly the bargaining pie expands, sometimes even up to the collusive level suggesting that delegation is conducive to implicit collusion. Surprisingly, a party's payoff can be inversely related to its bargaining power. The well-known duopoly result of overproduction occurs only in unilateral delegations and when the delegating party is sufficiently strong.
|Date of creation:||19 Jul 2011|
|Contact details of provider:|| Postal: Norwich NR4 7TI|
Phone: 44 1603 591131
Fax: +44(0)1603 4562592
Web page: http://www.uea.ac.uk/economics
More information through EDIRC
|Order Information:|| Postal: Jessica Pointer, School of Economics, University of East Anglia, Norwich Research Park, Norwich, NR4 7TJ, UK|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Das, Satya P., 1997. "Strategic managerial delegation and trade policy," Journal of International Economics, Elsevier, vol. 43(1-2), pages 173-188, August.
- Schmidt, Klaus M., 1996.
"Managerial Incentives and Product Market Competition,"
CEPR Discussion Papers
1382, C.E.P.R. Discussion Papers.
- Schmidt, Klaus M., 1997. "Managerial Incentives and Product Market Competition," Munich Reprints in Economics 19772, University of Munich, Department of Economics.
- Straume, O.R., 1999.
"Union Collusion and Intra-Industry Trade,"
Norway; Department of Economics, University of Bergen
1399, Department of Economics, University of Bergen.
- Haskel, Jonathan & Martin, Christopher, 1992. "Margins, concentration, unions and the business cycle : Theory and evidence for Britain," International Journal of Industrial Organization, Elsevier, vol. 10(4), pages 611-632, December.
- Klaus M. Schmidt, 1997. "Managerial Incentives and Product Market Competition," Review of Economic Studies, Oxford University Press, vol. 64(2), pages 191-213.
- Parbudyal Singh & Naresh C. Agarwal, 2002. "Union Presence and Executive Compensation: An Exploratory Study," Journal of Labor Research, Transaction Publishers, vol. 23(4), pages 631-646, October.
- Mujumdar, Sudesh & Pal, Debashis, 2007. "Strategic managerial incentives in a two-period Cournot duopoly," Games and Economic Behavior, Elsevier, vol. 58(2), pages 338-353, February.
- Ray, Tridip, 1999. "Share tenancy as strategic delegation," Journal of Development Economics, Elsevier, vol. 58(1), pages 45-60, February.
- Jan Zabojnik, 1998. "Sales Maximation and Specific Human Capital," RAND Journal of Economics, The RAND Corporation, vol. 29(4), pages 790-802, Winter.
- McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
- Vickers, John, 1985. "Delegation and the Theory of the Firm," Economic Journal, Royal Economic Society, vol. 95(380a), pages 138-147, Supplemen.
- Oliver D. Hart, 1983. "The Market Mechanism as an Incentive Scheme," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 366-382, Autumn.
- Szymanski, Stefan, 1994. "Strategic delegation with endogenous costs : A duopoly with wage bargaining," International Journal of Industrial Organization, Elsevier, vol. 12(1), pages 105-116, March.
- Basu, Kaushik & Ghosh, Arghya & Ray, Tridip, 1997. "The Babu and Boxwallah: Managerial Incentives and Government Intervention in a Developing Economy," Review of Development Economics, Wiley Blackwell, vol. 1(1), pages 71-90, February.
- Rajesh Aggarwal & Andrew A. Samwick, 1996.
"Executive Compensation, Strategic Competition, and Relative Performance Evaluation: Theory and Evidence,"
NBER Working Papers
5648, National Bureau of Economic Research, Inc.
- Rajesh K. Aggarwal & Andrew A. Samwick, 1999. "Executive Compensation, Strategic Competition, and Relative Performance Evaluation: Theory and Evidence," Journal of Finance, American Finance Association, vol. 54(6), pages 1999-2043, December.
- Jianbo Zhang & Zhentang Zhang, 1997. "R&D in a strategic delegation game," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 18(5), pages 391-398.
- Lambertini, Luca & Trombetta, Marco, 2002. "Delegation and firms' ability to collude," Journal of Economic Behavior & Organization, Elsevier, vol. 47(4), pages 359-373, April.
- Basu, Kaushik, 1995. "Stackelberg equilibrium in oligopoly: An explanation based on managerial incentives," Economics Letters, Elsevier, vol. 49(4), pages 459-464, October.
- Chaim Fershtman & Kenneth L Judd, 1984.
"Equilibrium Incentives in Oligopoly,"
642, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
When requesting a correction, please mention this item's handle: RePEc:uea:aepppr:2011_28. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Theodore Turocy)
If references are entirely missing, you can add them using this form.