Managerial optimism and investment choice

Florian Englmaier

Managerial and Decision Economics, 2010, vol. 31, issue 4, 303-310

Abstract: This paper analyzes whether it might be desirable for a firm to hire an overoptimistic manager to commit to a certain R&D strategy. I consider a Cournot model with an ex-ante R&D stage where firms can invest in cost reduction before product market competition takes place. I show that firms want to hire overoptimistic managers and argue that a manager's type may serve as a substitute for strategic delegation via contracts. Copyright © 2010 John Wiley & Sons, Ltd.

Date: 2010
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Working Paper: Managerial Optimism and Investment Choice (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:mgtdec:v:31:y:2010:i:4:p:303-310

DOI: 10.1002/mde.1498

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