Premium
Managerial Bonus Systems in a Differentiated Duopoly: A Comment
Author(s) -
Jansen Thijs,
Lier Arie,
Witteloostuijn Arjen
Publication year - 2012
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.1562
Subject(s) - duopoly , delegate , cournot competition , microeconomics , product differentiation , economics , product (mathematics) , computer science , mathematics , geometry , programming language
A differentiated Cournot duopoly is considered where firm owners delegate the output decision to a manager, who is rewarded on the basis of his performance. If this performance is measured in terms of (i) pure profits, (ii) a combination of profits and sales, (iii) a combination of profits and market share or (iv) relative profits, the latter option strictly dominates the others if the products are perfect substitutes. Recently it was claimed that this result does not hold for all levels of product substitutability. In this comment, we show however that this result is robust against the introduction of product differentiation. Copyright © 2011 John Wiley & Sons, Ltd.