Year: 1992
Author: Adolph, Brigitte
Journal of Contextual Economics – Schmollers Jahrbuch, Vol. 112 (1992), Iss. 3 : pp. 401–418
Abstract
This paper examines optimal incentive schemes for managers, in a Cournot duopoly framework. Under symmetric information, there are three equilibrium outcomes: (1) both managers are required to produce the Cournot equilibrium outputs; (2) one manager is required to produce the Stackelberg leader output, the other obtains a pure profit share; (3) both manager’s are paid a share of profit and market revenue. However, (3) is not plausible, because it is Pareto dominated by (1). Under asymmetric information results change drastically. In fact, (3) is the unique equilibrium outcome. Therefore, oligopoly plus asymmetric information explains why owners twist their manager’s incentives away from strict profit maximization towards sales maximization
Journal Article Details
Publisher Name: Global Science Press
Language: Multiple languages
DOI: https://doi.org/10.3790/schm.112.3.401
Journal of Contextual Economics – Schmollers Jahrbuch, Vol. 112 (1992), Iss. 3 : pp. 401–418
Published online: 1992-03
AMS Subject Headings: Duncker & Humblot
Copyright: COPYRIGHT: © Global Science Press
Pages: 18
Author Details
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