TITLE:
Endogenous Choice of Managerial Incentives in a Mixed Duopoly with a Foreign Private Firm
AUTHORS:
Kadohognon Sylvain Ouattara
KEYWORDS:
Public Firm, Foreign Private Firm, Strategic Delegation, Mixed Duopoly, Cournot Model
JOURNAL NAME:
Theoretical Economics Letters,
Vol.6 No.2,
April
27,
2016
ABSTRACT: This paper studies the endogenous choice of managerial incentives in a
mixed duopoly where a public firm competes with a foreign private firm. The
foreign firm is partly owned by domestic investors and the firm’s owners have
the option to hire a manager. We focus on a new incentive scheme of public firm’s
managers that is a linear combination of social welfare and sales revenue. In
equilibrium we find that when the weight attached to the foreign firm’s profits
in social welfare is high enough, only the public firm hires a manager. This is
in contrast with the classical sales delegation contract used in existing
literature.