Download This PaperStrategic Delegation in Experimental Markets
19 Pages Posted: 22 Mar 2001
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Strategic Delegation in Experimental Markets
Date Written: May 2000
Abstract
In this experiment, we analyze strategic delegation in a Cournot duopoly. Owners can choose among two different contracts which determine their managers' salaries. One contract simply gives managers incentives to maximize firm profits, while the second contract gives an additional sales bonus. Although theory predicts the second contract to be chosen, it is only rarely chosen in the experimental markets. This behavior is rational given that managers do not play according to the subgame perfect equilibrium prediction when asymmetric contracts are given.
Keywords: Strategic Delegation, Managerial Incentives, Experimental Economics
JEL Classification: C72, C92, D21, D43
Suggested Citation: Suggested Citation
CESifo (Center for Economic Studies and Ifo Institute)
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Munich, DE-81679
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IZA Institute of Labor Economics
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Bonn, D-53072
Germany
Max Planck Institute for Research on Collective Goods ( email )
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D-53113 Bonn, 53113
Germany
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