TY - JOUR
T1 - Endogenous managerial compensation contracts in experimental quantity-setting duopolies
AU - Barreda-tarrazona, Iván
AU - Georgantzís, Nikolaos
AU - Manasakis, Constantine
AU - Mitrokostas, Evangelos
AU - Petrakis, Emmanuel
N1 - NOTICE: this is the author’s version of a work that was accepted for publication in Economic Modelling. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Economic Modelling, 54, 2016, DOI: 10.1016/j.econmod.2015.12.028
PY - 2016/4/1
Y1 - 2016/4/1
N2 - Given the ongoing debate on managerial compensation schemes, our paper offers empirical insights on the strategic choice of firms' owners over the terms of a managerial compensation contract, as a commitment device aiming at gaining competitive advantage in the product market. In a quantity setting duopoly we experimentally test whether firms' owners compensate their managers through contracts combining own profits either with revenues or with relative performance, and the resulting managerial behaviour in the product market. Prominent among our results is that firms' owners choose relative performance over profit revenue contracts more frequently. Further, firms' owners successfully induce a more aggressive behaviour by their managers in the market, by setting incentives which deviate from strict profit maximization.
AB - Given the ongoing debate on managerial compensation schemes, our paper offers empirical insights on the strategic choice of firms' owners over the terms of a managerial compensation contract, as a commitment device aiming at gaining competitive advantage in the product market. In a quantity setting duopoly we experimentally test whether firms' owners compensate their managers through contracts combining own profits either with revenues or with relative performance, and the resulting managerial behaviour in the product market. Prominent among our results is that firms' owners choose relative performance over profit revenue contracts more frequently. Further, firms' owners successfully induce a more aggressive behaviour by their managers in the market, by setting incentives which deviate from strict profit maximization.
KW - Experimental economics
KW - Oligopoly theory
KW - Managerial delegation
KW - Endogenous contracts
U2 - 10.1016/j.econmod.2015.12.028
DO - 10.1016/j.econmod.2015.12.028
M3 - Article
SN - 0264-9993
VL - 54
SP - 205
EP - 217
JO - Economic Modelling
JF - Economic Modelling
ER -