Managerial bonus systems in a differentiated duopoly: A comment

M.J.M. Jansen, A. van Lier, A. van Witteloostuijn

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A differentiated cournot duopoly is considered where firm owners delegate the output decision to a manager, who is rewarded on the basis of his performance. If this performance is measured in terms of (i) pure profits, (ii) a combination of profits and sales, (iii) a combination of profits and market share or (iv) relative profits, the latter option strictly dominates the others if the products are perfect substitutes. Recently it was claimed that this result does not hold for all levels of product substitutability. In this comment, we show however that this result is robust against the introduction of product differentiation.
Original languageEnglish
Pages (from-to)61-70
JournalManagerial and Decision Economics
Issue number1
Publication statusPublished - 1 Jan 2012

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