LONG-TERM AND SHORT-TERM CONTRACT IN A MIXED MARKET *

With a two-period mixed oligopolistic framework, this paper analyses the interaction between the length of incentive contracts and market behaviour. Assuming an environment in which firms choose either a long-term or short-term contract, we examine how contracts differ between public and private firms. The results show that the contracts would differ completely among firms; public firm prefers to make a short-term contract while private firm makes a long-term contract. Copyright Blackwell Publishing Ltd/University of Adelaide and Flinders University 2005..