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Sales Maximation and Specific Human Capital

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  • Jan Zabojnik

Abstract

Profit-maximizing owners of firms may find it optimal to provide managers with incentives to maximize sales in addition to profits. This influences the outcome of the bargaining game between workers and managers over workers' wages and helps to solve the problem of underinvestment by workers in specific human capital. Iinvestigate optimal managerial contracts from this point of view and show that the optimal contract is a function of sales in addition to profits.

Suggested Citation

  • Jan Zabojnik, 1998. "Sales Maximation and Specific Human Capital," RAND Journal of Economics, The RAND Corporation, vol. 29(4), pages 790-802, Winter.
    • Handle: RePEc:rje:randje:v:29:y:1998:i:winter:p:790-802
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    Cited by:

    1. Ishita Chatterjee & Bibhas Saha, 2013. "Bargaining Delegation in Monopoly," Economics Discussion / Working Papers 13-09, The University of Western Australia, Department of Economics.
    2. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
    3. Ishita Chatterjee & Bibhas Saha, 2011. "Bilateral Delegation, Wage Bargaining and Managerial Incentives: Implications for Efficiency and Distribution," University of East Anglia Applied and Financial Economics Working Paper Series 028, School of Economics, University of East Anglia, Norwich, UK..

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