Delegation and the theory of the firm

Vickers, John

doi:10.1017/cbo9780511528231.023

Cited by 439 publications

(543 citation statements)

References 6 publications

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“…The literature on delegation studies has established that the owner offers an incentive contract including sales revenue (Vickers, 1985;Fershtman and Judd, 1987;Sklivas, 1987), market share (Jansen et al, 2007), and a rival firm's profit (Aggarwal and Samwick, 1999). This paper studies the delegation game in which the firm's owner offers the manager a contract taking considering the weighted average of profit and either consumer surplus or social welfare.…”

Section: Introductionmentioning

confidence: 99%

Corporate social responsibility and strategic relationships

Hino

Zennyo

2017

Int Rev Econ

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We analyze a delegation game relevant to the conduct of corporate social responsibility (CSR) in which the firm's owner offers the manager a contract consisting of firm profit and social welfare. We derive three results that distinctly differ from existing findings. First, CSR decisions are strategic complements for firms. Second, with simultaneous CSR decisions, the equilibrium price is equal to marginal cost, despite the fact that firms compete in a Cournot duopoly. Finally, with sequential CSR decisions, unlike the follower firm, the leader firm never exhibits CSR. However, the follower firm can enjoy a profit equal to that derived by the leader in a Cournot-Stackelberg game.

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Section: Introductionmentioning

confidence: 99%

Corporate social responsibility and strategic relationships

Hino

Zennyo

2017

Int Rev Econ

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“…This was demonstrated by Vickers (1985), Fershtman and Judd (1987) and Sklivas (1987), who argue that owners can increase pro ts by hiring managers on incentive contracts that reward according to a weighted average of pro ts and revenues. This makes managers more aggressive, which can raise pro ts in Cournot oligopoly.…”

Section: Corporate Governance and Imperfect Competitionmentioning

confidence: 99%

Market Distortions and Corporate Governance

Kelsey

Milne

2005

SSRN Journal

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This paper studies corporate governance when a rm operates in imperfect markets. We derive rms' decisions from utility maximisation by individuals. This reduces the usual monopoly distortion. Corporate governance can effect the equilibrium in the product (or input) markets. This enables us to endogenise the objective function of the rm. If the rm cannot commit not to change its constitution, we nd a Coase-like result where all market power is lost in the limit. We present a more abstract model of governance in the presence of market distortions and discuss its implications for the governance of universities.

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“…Following the standard delegation model (e.g. Fershtman and Judd 1987, Sklivas 1987, Vickers 1985, we assume that the manager of the PMF is compensated on the basis of profits = ( ) and revenues = . 8 Likewise, the manager of the Coop can be compensated based on the Coop's profit and sales revenue .…”

Section: The Modelmentioning

confidence: 99%

Optimal Compensation Structure in Consumer Cooperatives Under Mixed Oligopoly

Kopel

Marini

2012

SSRN Journal

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Abstract. The main aim of this paper is to derive properties of an optimal compensation scheme for consumer cooperatives (Coops) in situations of strategic interaction with profitmaximizing firms (PMFs). Our model provides a reason why Coops are less prone than PMFs to pay variable bonuses to their managers. We show that this occurs under price competition when in equilibrium the Coop prefers to pay a straight salary to its manager whereas the profit-maximizing rival adopts a variable, high-powered incentive scheme. The main rationale is that, due to consumers' preferences, a Coop is per se highly expansionary in term of output and, therefore, does not need to provide strong strategic incentives to their managers to expand output aggressively by undercutting its rival.

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Delegation and the theory of the firm

Cited by 439 publications

References 6 publications

Corporate social responsibility and strategic relationships

Corporate social responsibility and strategic relationships

Market Distortions and Corporate Governance

Optimal Compensation Structure in Consumer Cooperatives Under Mixed Oligopoly

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