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Managers Compensation and Collusive Behaviour under Cournot Oligopoly

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  • Marco, Marini

Abstract

The aim of the present paper is to show that the existence of a concrete outside option for firms' executives can induce, under specific circumstances, every firm to adopt restrictive output practises. In particular, the paper characterizes the conditions for which, under Cournot oligopoly, existing firms behave more collusively than in a standard Cournot model. It is also shown that room exists for perfect and stable collusive agreements amongst firms. Other interesting findings are also twofold. Firstly, that the equilibrium executives' pay will usually be dependant upon the number of companies initially disposing of the technology and/or of the organizational knowledge required to set up the business. Secondly, that companies' procedures difficult to duplicate can constitute a beneficial form of competition policy in that they induce the firms to behave less collusively in the product market.

Suggested Citation

  • Marco, Marini, 1997. "Managers Compensation and Collusive Behaviour under Cournot Oligopoly," MPRA Paper 31871, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:31871
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    References listed on IDEAS

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    1. Fershtman, Chaim & Judd, Kenneth L, 1987. "Equilibrium Incentives in Oligopoly," American Economic Review, American Economic Association, vol. 77(5), pages 927-940, December.
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    7. Jensen, Michael C & Murphy, Kevin J, 1990. "Performance Pay and Top-Management Incentives," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 225-264, April.
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    9. Marini, Marco A., 1998. "Earnings, Coalitions and the Stability of the Firm," MPRA Paper 70728, University Library of Munich, Germany, revised 2012.
    10. Lars A. Stole & Jeffrey Zwiebel, 1996. "Intra-firm Bargaining under Non-binding Contracts," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 63(3), pages 375-410.
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    Cited by:

    1. Marini, Marco, 1998. "Stable producer co-operatives in competitive markets," MPRA Paper 31925, University Library of Munich, Germany.

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    More about this item

    Keywords

    Managers' Compensation; Oligopoly; Collusion; Outside Option;
    All these keywords.

    JEL classification:

    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • J00 - Labor and Demographic Economics - - General - - - General
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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