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Delegation and Incentives under Evolutionarily Stable Conjectures

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  • Henrik Vetter

Abstract

Existing results show that in a homogenous Cournot duopoly, commitment by delegation harms profit. This conclusion presupposes that market conduct is the same whether incentives are aggressive or accommodating. We study delegation and incentives under evolutionarily stable conjectures and show how performance pay co‐determines market conduct. In fact, in equilibrium with evolutionarily stable conjectures, we show that commitment through delegation leads to a profit increase. Manipulation of managerial incentives produces less competition and therefore benefits firms' owners even in symmetric homogenous oligopoly. Copyright © 2016 John Wiley & Sons, Ltd.

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  • Henrik Vetter, 2017. "Delegation and Incentives under Evolutionarily Stable Conjectures," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 38(6), pages 784-791, September.
    • Handle: RePEc:wly:mgtdec:v:38:y:2017:i:6:p:784-791
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    Cited by:

    1. Michael Kopel & Eva Maria Putz, 2021. "Sharing managerial contract information in a vertically related market," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(4), pages 1037-1047, June.

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