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Managerial risk-taking incentives, product market competition, and welfare

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Managerial risk-taking incentives, product market competition, and welfare. / Dasgupta, Sudipto; Shin, Jhinyoung.
In: European Economic Review, Vol. 48, No. 2, 04.2004, p. 391-401.

Research output: Contribution to Journal/Magazine › Journal article › peer-review

Harvard

Dasgupta, S & Shin, J 2004, 'Managerial risk-taking incentives, product market competition, and welfare', European Economic Review, vol. 48, no. 2, pp. 391-401. https://doi.org/10.1016/S0014-2921(02)00325-2

APA

Dasgupta, S., & Shin, J. (2004). Managerial risk-taking incentives, product market competition, and welfare. European Economic Review, 48(2), 391-401. https://doi.org/10.1016/S0014-2921(02)00325-2

Vancouver

Dasgupta S, Shin J. Managerial risk-taking incentives, product market competition, and welfare. European Economic Review. 2004 Apr;48(2):391-401. doi: 10.1016/S0014-2921(02)00325-2

Author

Dasgupta, Sudipto ; Shin, Jhinyoung. / Managerial risk-taking incentives, product market competition, and welfare. In: European Economic Review. 2004 ; Vol. 48, No. 2. pp. 391-401.

Bibtex

@article{f656edb1ab2948f7b20b6bf2fc5af0fd,
title = "Managerial risk-taking incentives, product market competition, and welfare",
abstract = "Managers{\textquoteright} compensation may increase with the variance of the firm's profits. This paper investigates how this affects their choice of strategic variables, and how that affects managerial compensation. The social welfare aspects of this interaction are analyzed in a duopoly setting with uncertain linear demand and linear marginal cost. Compared to a situation in which the managers{\textquoteright} compensation does not depend on the variance of profits, social welfare may be either higher, lower, or remain unaffected, depending on the slope of the marginal cost curve and whether the competing firms produce goods that are demand substitutes or complements.",
keywords = "Managerial compensation, Bertrand and Cournot competition, Price-quantity choice",
author = "Sudipto Dasgupta and Jhinyoung Shin",
year = "2004",
month = apr,
doi = "10.1016/S0014-2921(02)00325-2",
language = "English",
volume = "48",
pages = "391--401",
journal = "European Economic Review",
issn = "0014-2921",
publisher = "Elsevier",
number = "2",

}

RIS

TY - JOUR

T1 - Managerial risk-taking incentives, product market competition, and welfare

AU - Dasgupta, Sudipto

AU - Shin, Jhinyoung

PY - 2004/4

Y1 - 2004/4

N2 - Managers’ compensation may increase with the variance of the firm's profits. This paper investigates how this affects their choice of strategic variables, and how that affects managerial compensation. The social welfare aspects of this interaction are analyzed in a duopoly setting with uncertain linear demand and linear marginal cost. Compared to a situation in which the managers’ compensation does not depend on the variance of profits, social welfare may be either higher, lower, or remain unaffected, depending on the slope of the marginal cost curve and whether the competing firms produce goods that are demand substitutes or complements.

AB - Managers’ compensation may increase with the variance of the firm's profits. This paper investigates how this affects their choice of strategic variables, and how that affects managerial compensation. The social welfare aspects of this interaction are analyzed in a duopoly setting with uncertain linear demand and linear marginal cost. Compared to a situation in which the managers’ compensation does not depend on the variance of profits, social welfare may be either higher, lower, or remain unaffected, depending on the slope of the marginal cost curve and whether the competing firms produce goods that are demand substitutes or complements.

KW - Managerial compensation

KW - Bertrand and Cournot competition

KW - Price-quantity choice

U2 - 10.1016/S0014-2921(02)00325-2

DO - 10.1016/S0014-2921(02)00325-2

M3 - Journal article

VL - 48

SP - 391

EP - 401

JO - European Economic Review

JF - European Economic Review

SN - 0014-2921

IS - 2

ER -