Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/93738
Year of Publication: 
2010
Series/Report no.: 
SFB/TR 15 Discussion Paper No. 328
Publisher: 
Sonderforschungsbereich/Transregio 15 - Governance and the Efficiency of Economic Systems (GESY), München
Abstract: 
This paper shows that it is profitable for a firm to hire an overoptimistic manager to commit to a certain investment strategy in an R&D tournament situation. In the unique symmetric equilibrium, all firms delegate to overoptimistic managers, where the optimal degree of overoptimism depends on the riskiness of the tournament. In these situations a manager's type may serve as a substitute for delegation via contracts. By delegating to overoptimistic managers, firms can escape the rat race nature of R&D tournaments.
Subjects: 
Strategic Delegation
Overoptimism
Tournaments
JEL: 
J32
J33
M12
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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