Managers Compensation and Collusive Behaviour under Cournot Oligopoly

Marco, Marini (1997): Managers Compensation and Collusive Behaviour under Cournot Oligopoly.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Managers' Compensation, Oligopoly, Collusion, Outside Option
• Subjects: J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J62 - Job, Occupational, and Intergenerational Mobility; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure ; Wage Differentials; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L20 - General; J - Labor and Demographic Economics > J0 - General > J00 - General; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M5 - Personnel Economics > M51 - Firm Employment Decisions ; Promotions; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J30 - General

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