Investment Choice with Managerial Incentive Schemes
Published By: IGIDR | Published Date: December, 21 , 2017In this paper we show that firms might get an additional strategic benefit from using
marginal-cost-reducing investments in conjunction with a managerial incentive scheme. While both
these instruments allow firms to \aggressively" participate in product market competition, we show that
they act as strategic substitutes or complements depending on whether they are chosen simultaneously
or sequentially under complete information. Given that the use of such instruments is inseparably linked
with a Prisoner's Dilemma kind of situation, our analysis shows a way to mitigate such effects, through
their simultaneous use
Author(s): Shubhro Sarkar | Posted on: Mar 12, 2018 | Views() | Download (93)