Economics at your fingertips  

Why socially concerned firms use low-powered managerial incentives: A complementary explanation

Michael Kopel and Eva Maria Putz

Economic Modelling, 2021, vol. 94, issue C, 473-482

Abstract: We study a duopoly market where a profit-maximizing firm and a socially concerned firm compete by offering differentiated products to consumers. Both firms delegate the quantity (price) decisions to a manager. The socially concerned firm employs an intrinsically motivated manager whose interest is partially aligned with the firm's objective. The profit-maximizing firm's manager is simply interested in maximizing compensation. We find that depending on the substitutability of the firms' products and the level of the firm's social concern, the socially concerned firm might prefer – solely for strategic reasons – a flat wage for compensating its motivated manager rather than a variable bonus. Our paper points to strategic motives as a complementary explanation for the observation that hybrid organizations with objectives other than profits frequently rely on different forms of compensation than their for-profit rivals.

Keywords: Managerial compensation; Intrinsic motivation; Socially concerned firms; Strategic incentives in duopoly (search for similar items in EconPapers)
JEL-codes: D43 L13 L21 M12 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1016/j.econmod.2020.11.002

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

Page updated 2024-03-31
Handle: RePEc:eee:ecmode:v:94:y:2021:i:c:p:473-482