Strategic incentives for market share.
Market share objectives are prominent in many industries, especially where man- agers pay much attention to league table rankings. This paper explores the strategic rationale for giving managers incentives based on market share in an oligopoly com- peting in strategic substitutes. Moreover, the pape...
| Main Author: | |
|---|---|
| Format: | Working paper |
| Language: | English |
| Published: |
Department of Economics (University of Oxford)
2005
|
| Summary: | Market share objectives are prominent in many industries, especially where man- agers pay much attention to league table rankings. This paper explores the strategic rationale for giving managers incentives based on market share in an oligopoly com- peting in strategic substitutes. Moreover, the paper discusses evidence on executive compensation practice in the automotive and investment banking industries. As predicted by the theory, …rms in both industries use explicit contractual incentives based on market share. The pro…tability squeeze in the US car industry due to aggressive buyer discount programs can thus be understood as a consequence of prevailing management incentives. |
|---|