Electronic Resource
Oxford, UK
:
Blackwell Publishing Ltd
Journal of economics & management strategy
5 (1996), S. 0
ISSN:
1530-9134
Source:
Blackwell Publishing Journal Backfiles 1879-2005
Topics:
Economics
Notes:
This paper deals with the strategic role of the temporal dimension of contracts in a duopoly market. Is it better for a firm to sign long-term incentive contracts with managers or short-term contracts? For the linear case, with strategic substitutes (complements) in the product market, the incentive variables are also strategic substitutes (complements). It is shown that a long-term contract makes a firm a leader in incentives, while a short-term contract makes it a follower. We find that, under Bertrand competition, in equilibrium one firm signs a long-term contract and the other firm short-term incentive contracts; however, under Cournot competition, the dominant strategy is to sign long-term incentive contracts.
Type of Medium:
Electronic Resource
URL:
http://dx.doi.org/10.1111/j.1430-9134.1996.00343.x
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