Bonus Scheme, Managerial Delegation, and Quantity Competition

Chung‐Hui Chou

Managerial and Decision Economics, 2025, vol. 46, issue 4, 2468-2473

Abstract: This note examines if owners would offer a bonus for each unit of output dependent on both firms' output levels in equilibrium and the impacts on market performances. The main contribution is showing that owners may lessen quantity competition more than the standard Cournot by adopting the relative quantity delegation in which they offer an incentive scheme based on profit plus a bonus for each unit of output that decreases in their own output levels but increases in rivals' ones. Consequently, contrary to conventional wisdom, output delegation increases profitability but reduces consumers' surplus.

Date: 2025
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https://doi.org/10.1002/mde.4476

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