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Competition and the Strategic Choice of Managerial Incentives: the Relative Performance Case

Alessandra Chirco (), Caterina Colombo () and Marcella Scrimitore ()

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper we study the role of market competitiveness in a strategic delegation game in which owners delegate output decisions to managers interested in the firm's relative performance. In particular we study how the optimal delegation scheme - i.e. the distortion from pure profit maximization - is affected by market concentration and the elasticity of market demand. We show that these two indexes of market competitiveness do not alter managerial incentives in the same way: while the optimal degree of delegation decreases as the market becomes less concentrated, it increases as demand becomes more elastic.

Keywords: Strategic delegation; relative performance; oligopoly; isoelastic demand (search for similar items in EconPapers)
JEL-codes: D43 L13 L21 (search for similar items in EconPapers)
Date: 2009-12
New Economics Papers: this item is included in nep-bec, nep-com and nep-cse
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Related works:
Journal Article: COMPETITION AND THE STRATEGIC CHOICE OF MANAGERIAL INCENTIVES: THE RELATIVE PERFORMANCE CASE (2011) Downloads
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