Skip to main content
Article thumbnail
Location of Repository

Bargaining over Managerial Contracts in Delegation Games: The Differentiated Goods Case

By Yasuhiko Nakamura


This paper investigates the bargaining between owners and managers over their managerial delegation contracts, in order to explain the disclosure obligation that is central to many modern corporate governance codes. We consider the managerial incentive contracts based on the profit and sales of each firm and the delegation game with bargaining in two types of differentiated-products duopolistic competition wherein each firm's manager chooses his or her own output or price. We show that in equilibrium, the profit of each firm decreases, whereas the consumer surplus and social welfare increase as the relative bargaining power of the managers increases in both quantity and price competitions. Thus, we find that similar to the case of the quantity competition wherein both firms produce homogeneous goods in Witteloostuijn et al. (2007), the managerial power of managers is positively associated with social welfare.

OAI identifier:

Suggested articles


  1. (2007). A note on strategic delegation: The market share case”
  2. (2007). Barganing over managerial contracts in delegation games: Managerial power, contract disclosure and cartel behavior”
  3. (1987). Equilibrium incentives in oligopoly”
  4. (1985). Managerial incentives as a strategic variable in duopolistic environment”
  5. (1984). Price and quantity competition in a differentiated duopoly”
  6. (2002). Relative performance as a strategic commitment mechanism”
  7. (1992). Relative performance evaluation of management”
  8. (1994). Strategic delegation with endogenous costs: A duopoly with wage bargaining”
  9. (1986). The nash bargaining solution in economic modelling”
  10. (1987). The strategic choice of management incentives”
  11. (1995). Unions and strategic managerial incentives”

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.