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The strategic choice of managers and managerial discretion

journal contribution
posted on 2003-12-01, 00:00 authored by Xiangkang YinXiangkang Yin
Managerial discretion is likely to be beneficial to shareholders because of strategic cross‐effects in an oligopoly. In certain circumstances, shareholders deliberately retain managerial discretion in equilibrium even when the reduction of managerial discretion is cost free. It is found that the positive effect of managerial discretion on profits can only be created by power‐building (shirking) managers if quantity (price) competition prevails in the market. Consequently, the dominant strategy for the owners of a quantity‐ (price‐) competing company is to employ a power‐building (shirking) manager. The strategic effect of such a match between the type of manager and the form of competition exists for all managerial decisions as far as firms interact with each other.

History

Journal

Australian economic papers

Volume

42

Pagination

373-385

Location

Chichester, Eng.

ISSN

0004-900X

eISSN

1467-8454

Language

eng

Publication classification

C1.1 Refereed article in a scholarly journal

Copyright notice

2003, Blackwell Publishing Ltd/University of Adelaide and Flinders University of South Australia

Issue

4

Publisher

John Wiley & Sons

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