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Title:Market competition and lower tier incentives PDF Logo
Authors:Theilen, Bernd
Issue Date:2008
Series/Report no.:CESifo working paper 2453
Abstract:The relationship between competition and performance-related pay has been analyzed in single-principal-single-agent models. While this approach yields good predictions for managerial pay schemes, the predictions fail to apply for employees at lower tiers of a firm's hierarchy. In this paper, a principal-multi-agent model of incentive pay is developed which makes it possible to analyze the effect of changes in the competitiveness of markets on lower tier incentive payment schemes. The results explain why the payment schemes of agents located at low and mid tiers are less sensitive to changes in competition when aggregated firm data is used.
Subjects:Cournot competition
contract delegation
moral hazard
entry
market size
wage cost
JEL:D82
J21
L13
L22
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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