✦ LIBER ✦

Delegation and strategic incentives for managers in contests

✍ Scribed by Matthias Kräkel

Publisher: John Wiley and Sons
Year: 2002
Tongue: English
Weight: 159 KB
Volume: 23
Category: Article
ISSN: 0143-6570
DOI: 10.1002/mde.1091

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✦ Synopsis

Abstract

Owners usually want their managers to maximize profits. As the literature on strategic delegation has shown it may be beneficial to owners to put a positive weight on sales in the optimal linear incentive scheme for managers to make them behave more aggressively in the market. This paper shows that if the competition between the managers can be characterized as a contest, owners may induce their managers to maximize sales. Moreover, there is a first‐mover advantage for owners when choosing their incentive schemes. If delegation is endogenous the type of contest will determine whether all owners delegate their decisions to managers or not. Copyright © 2002 John Wiley & Sons, Ltd.

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