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Common holdings and strategic manager compensation: The case of an asymmetric triopoly

Werner Neus and Manfred Stadler

No 109, University of Tuebingen Working Papers in Economics and Finance from University of Tuebingen, Faculty of Economics and Social Sciences

Abstract: We study an asymmetric triopoly in a heterogeneous product market where quantity decisions are delegated to managers. The two biggest firms are commonly owned by shareholders such as index funds while the smallest firm is owned by independent shareholders. Under such a common holding owner structure, the owners have an incentive to coordinate when designing their manager compensation schemes. This coordination leads to a reallocation of production and induces a redistribution of pro profits. The trade volume in the market is reduced so that shareholder coordination is detrimental to consumer surplus as well as welfare.

Keywords: common holdings; index funds; shareholder coordination; manager compensation (search for similar items in EconPapers)
JEL-codes: G32 L22 M52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn and nep-ind
Date: 2018
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