Executive compensation in oligopolies: Sales, profits and pay

Abstract

This chapter analyzes the owner-manager contracting problem for firms competing in imperfectly competitive markets. The strategic interdependence of firms results in optimal incentive contracts that either compensate or penalize managers for sales. The predictions of the model are tested empirically and estimates of contract coefficients are reported. The results fail to confirm the predictions of the theoretical model; however, the coefficient estimates suggest that while the effects of profits and sales on compensation vary significantly across firms and industries, managers of most firms are rewarded for increases in firm profits.

Citation

Chopin, M.C. (2000), "Executive compensation in oligopolies: Sales, profits and pay", Advances in Applied Microeconomics (Advances in Applied Microeconomics, Vol. 8), Emerald Group Publishing Limited, Leeds, pp. 101-122. https://doi.org/10.1016/S0278-0984(99)08005-0