Managerial bonus systems in a differentiated duopoly : a comment
van Witteloostuijn, Arjen
Faculty of Applied Economics
Managerial and decision economics. - London
, p. 61-70
University of Antwerp
A differentiatedCournot duopoly is consideredwhere firm owners delegate the output decision to a manager, who is rewarded on the basis of his performance. If this performance is measured in terms of (i) pure profits, (ii) a combination of profits and sales, (iii) a combination of profits andmarket share or (iv) relative profits, the latter option strictly dominates the others if the products are perfect substitutes. Recently it was claimed that this result does not hold for all levels of product substitutability. In this comment, we show however that this result is robust against the introduction of product differentiation.