Kopel, Michael ; Lambertini, Luca
(2012)
On the (non) existence of a price equilibrium in delegation games with relative performance compensation.
Bologna:
Dipartimento di Scienze economiche DSE,
p. 24.
DOI 10.6092/unibo/amsacta/4211.
In: Quaderni - Working Paper DSE
(807).
ISSN 2282-6483.
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Abstract
We show that Miller and Pazgal.s (2001) model of strategic delegation, in which managerial incentives are based upon relative performance, is affected by a non-existence problem which has impact on the price equilibrium. The undercutting incentives generating this result are indeed similar to those affecting the stability of price cartels.
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