2021
DOI: 10.1002/mde.3290
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Sharing managerial contract information in a vertically related market

Abstract: Recent research shows that in duopolies with strategic delegation, firm owners have an incentive to always share information about managerial compensation contracts.We study how sharing of contract information is affected by the presence of a supplier. We find that under quantity competition, a partial information-sharing equilibrium may occur. Firms that share contract information punish their managers for sales to soften supplier pricing. Mandating information sharing increases total welfare but decreases co… Show more

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Cited by 6 publications
(12 citation statements)
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“…The price‐setting Manager 2 has to anticipate Manager 1's conjectured output reaction function but has to use a conjectured incentive weight trueγ1^. Like Baik and Lee (2020) and Kopel and Putz (2021), we assume that it is common knowledge that the managers are offered a linear compensation contract. Therefore, Firm 1's quantity‐setting manager conjectures that Firm 2's price‐setting manager maximizes trueγ2^π2false(trueq1^,truep2^false)+false(1trueγ2^false)R2false(trueq1^,truep2^false).…”
Section: Discussionmentioning
confidence: 99%
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“…The price‐setting Manager 2 has to anticipate Manager 1's conjectured output reaction function but has to use a conjectured incentive weight trueγ1^. Like Baik and Lee (2020) and Kopel and Putz (2021), we assume that it is common knowledge that the managers are offered a linear compensation contract. Therefore, Firm 1's quantity‐setting manager conjectures that Firm 2's price‐setting manager maximizes trueγ2^π2false(trueq1^,truep2^false)+false(1trueγ2^false)R2false(trueq1^,truep2^false).…”
Section: Discussionmentioning
confidence: 99%
“…11 In such a situation, mandating information sharing leads to an improvement in terms of consumer and overall welfare, but both firms are then worse off (see, similarly, Oh & Shiiba, 2020). 10 Qualitatively, this result is reminiscent of the observations reported in, for example, Kopel and Putz (2021) and in contributions employing an observable delay approach (see, e.g., Kopel & Löffler, 2012), where in equilibrium two symmetric firms might make asymmetric choices. However, note that in our Cournot-Bertrand setting firms are asymmetric because they compete in different strategic variables.…”
Section: Mandatory Disclosurementioning
confidence: 91%
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