✦ LIBER ✦

Managerial Bonus Systems in a Differentiated Duopoly: A Comment

✍ Scribed by Thijs Jansen; Arie van Lier; Arjen van Witteloostuijn

Book ID: 102502794
Publisher: John Wiley and Sons
Year: 2011
Tongue: English
Weight: 230 KB
Volume: 33
Category: Article
ISSN: 0143-6570
DOI: 10.1002/mde.1562

No coin nor oath required. For personal study only.

✦ Synopsis

A differentiated Cournot duopoly is considered where firm owners delegate the output decision to a manager, who is rewarded on the basis of his performance. If this performance is measured in terms of (i) pure profits, (ii) a combination of profits and sales, (iii) a combination of profits and market share or (iv) relative profits, the latter option strictly dominates the others if the products are perfect substitutes. Recently it was claimed that this result does not hold for all levels of product substitutability. In this comment, we show however that this result is robust against the introduction of product differentiation. Copyright © 2011 John Wiley & Sons, Ltd.

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