This article challenges the results of the ‘classical’ managerial delegation literature, where it is assumed that the weight of themanagerial bonus only depends on the owner’s will tomaximise his own profits. By considering sales (S) (resp. relative profit (RP)) contracts, the received literature has found that (S,S) (resp. (RP,RP)) is the unique pure-strategy sub-game perfect Nash equilibrium in a game that contrasts S (resp. RP) with pure profit maximisation (PM). This article shows that none of the previous results may hold when the owner negotiates about managerial compensation with his manager.
Managerial delegation theory revisited
GORI, LUCA;
2017-01-01
Abstract
This article challenges the results of the ‘classical’ managerial delegation literature, where it is assumed that the weight of themanagerial bonus only depends on the owner’s will tomaximise his own profits. By considering sales (S) (resp. relative profit (RP)) contracts, the received literature has found that (S,S) (resp. (RP,RP)) is the unique pure-strategy sub-game perfect Nash equilibrium in a game that contrasts S (resp. RP) with pure profit maximisation (PM). This article shows that none of the previous results may hold when the owner negotiates about managerial compensation with his manager.
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