Emission taxation, green R&D, and managerial delegation contracts with environmental and sales incentives

Chul‐Hi Park and Sang‐Ho Lee

Managerial and Decision Economics, 2023, vol. 44, issue 4, 2366-2377

Abstract: We extend the analysis of a managerial delegation model with green R&D by incorporating two explicit incentive‐based executive compensation contracts. In the combination of environmental and sales delegations, (i) the incentives are higher than those under a single incentive scheme, (ii) firms' output and abatement efforts are higher, and (iii) total emissions are lower, and (iv) a firm's profits are higher than that under a sales delegation. Therefore, an emission tax policy, along with firms' compensation packages related to environmental delegation, can play a key role in curving market failure and improving welfare.

Date: 2023
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https://doi.org/10.1002/mde.3822

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Persistent link: https://EconPapers.repec.org/RePEc:wly:mgtdec:v:44:y:2023:i:4:p:2366-2377

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