Progressive managerial bonuses in a spatial Bertrand duopoly

The relationship of managerial bonuses and profit maximization is interesting both from an economic and a managerial viewpoint. Our contribution to this literature is showing that progressive managerial bonuses can increase profits in a spatial Bertrand competition, and furthermore they can help collusion

Managerial delegation in a dynamic renewable resource oligopoly

I propose a differential oligopoly game of resource extraction under (quasi-static) open-loop and nonlinear feedback strategies, where firms are managerial and two alternative types of delegation contract are considered. Under open-loop information, delegation expands the residual steady state resource stock. Conversely, under nonlinear feedback information the outcome depends on the structure of managerial incentives. If sales are used, once again delegation favours resource preservation. On the contrary, if market shares are included in the delegation contract, this combines with an underlying voracity effect in shrinking the steady state volume of the resource

Short-Term Managerial Contracts Facilitate Cartels

This paper shows how a series of commonly observed short-term CEO employment contracts improves cartel stability compared to a long-term contract. When a manager’s short-term appointment is renewed if and only if the firm hits a certain profit target, then (a) defection from collusion results in superior firm performance and thus reduces the chance of being fired immediately, while (b) future punishment results in inferior firm performance, thereby increasing the chance of being fired in the future. The introduction of this reemployment tradeoff intertwines with the usual monetary tradeoff and weakly improves cartel stability. Studying the impact of fixed versus variable salary components, I find that fixed components facilitate collusion with a short-term contract, while not affecting cartel stability with a long-term contract. I extend the model to argue how short-term renewable contracts are a source of cyclical collusive pricing. Finally, interpreting the results in the light of firm financing shows how debt-financed firms can form more stable cartels than equity-financed firms