Strategic delegation in oligopoly

Kopel, Michael; Pezzino, Mario

doi:10.4337/9781788112789.00018

Cited by 25 publications

(19 citation statements)

References 15 publications

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“…See Kopel and Pezzino () for a theoretical survey on strategic delegation theory and Sengul et al () for a review of the implications this literature has for strategic management.…”

mentioning

confidence: 99%

“…Following Park () and Kopel and Pezzino (), we could think of a two‐part compensation scheme

w_{i} = w_{i}^{F} + w_{i}^{V} M_{i}

consisting of a base salary

w_{i}^{F} \geq 0

and a commission on performance

w_{i}^{V} M_{i}

, where

w_{i}^{V} > 0

denotes the bonus rate that rewards performance as measured by M i . When such a scheme is implemented, from the point of view of the manager, maximizing the compensation w i becomes equivalent to maximizing M i .…”

mentioning

confidence: 99%

“…In this setting, note that maximizing profit net of compensation is the same as maximizing profit simpliciter because compensations actually paid only aim at securing managers' participation and, accordingly, will be equal to their (exogenously given) reservation income. For more on this point, see Kopel and Pezzino (, section 2.1).…”

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confidence: 99%

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A reconsideration of the link between vertical externality and managerial incentives

Claude

2018

Manage Decis Econ

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Previous research revealed that the strategic role of delegation contracts disappears if two quantity‐setting firms outsource input production to a monopolistic supplier. I show that this role is restored if the assumption of a downstream duopoly is relaxed. Thus, delegation contracts allow downstream profit‐maximizing owners to commit their firms to a behavior that differs from their preferences. This behavior varies nonmonotonically with the number of firms in the downstream market. Corresponding deviations from profit maximization are larger if the upstream monopolist makes a price precommitment. But little to no deviation occurs if the number of firms is large.

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“…See Kopel and Pezzino () for a theoretical survey on strategic delegation theory and Sengul et al () for a review of the implications this literature has for strategic management.…”

mentioning

confidence: 99%

“…Following Park () and Kopel and Pezzino (), we could think of a two‐part compensation scheme

w_{i} = w_{i}^{F} + w_{i}^{V} M_{i}

consisting of a base salary

w_{i}^{F} \geq 0

and a commission on performance

w_{i}^{V} M_{i}

, where

w_{i}^{V} > 0

mentioning

confidence: 99%

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A reconsideration of the link between vertical externality and managerial incentives

Claude

2018

Manage Decis Econ

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“…Our paper is related to several lines of research. Starting with the seminal paper of Vickers (), various authors have studied the competitive effects of appointing an agent who has divergent interests from the firm's goal (see the survey by Kopel and Pezzino ). In the context of oligopoly markets it has been demonstrated that by hiring a particular type of manager, firm owners can credibly commit to a business strategy that would be ‘implausible’ or ”irrational“ for themselves to adopt, but that is individually ‘rational’ for this particular manager (Englmaier ).…”

Section: Related Literaturementioning

confidence: 99%

Ceo Activism and Supply Chain Interactions

Hinterecker

Kopel

Ressi

2018

Ann Public Coop Econ

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In this paper we demonstrate that hiring a manager with a propensity to over-invest in socially and environmentally responsible production can increase firm profits if customers not only care about the responsible behavior of the market firm but also about the engagements of all players along the firm's supply chain. The new mechanism we identify relies on the complementarity of investments by the firm and its suppliers. We demonstrate that CEO activism of this kind might cause a win-win outcome where all parties along the supply chain, the firm's customers and society can be better off.

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“…Consequently, from an owner's perspective, maximizing profit net of compensation is the same as maximizing profit. For more on this point, seeKopel & Pezzino (2018).…”

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confidence: 99%