Common Holdings and Strategic Manager Compensation. The Case of an Asymmetric Triopoly

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URI: http://hdl.handle.net/10900/83380
http://nbn-resolving.de/urn:nbn:de:bsz:21-dspace-833809
http://dx.doi.org/10.15496/publikation-24771
Dokumentart: Aufsatz
Date: 2018-07-26
Source: University of Tübingen Working Papers in Economics and Finance ; 109
Language: English
Faculty: 6 Wirtschafts- und Sozialwissenschaftliche Fakultät
Department: Wirtschaftswissenschaften
DDC Classifikation: 330 - Economics
Keywords: Economics
Other Keywords:
Common holdings
index funds
shareholder coordination
manager compensation
License: Publishing license excluding print on demand
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Abstract:

We study an asymmetric triopoly in a heterogeneous product market where quantity decisions are delegated to managers. The two biggest firms are commonly owned by shareholders such as index funds while the smallest firm is owned by independent shareholders. Under such a common holding owner structure, the owners have an incentive to coordinate when designing their manager compensation schemes. This coordination leads to a reallocation of production and induces a redistribution of profits. The trade volume in the market is reduced so that shareholder coordination is detrimental to consumer surplus as well as welfare.

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