Intrafirm conflicts and interfirm price competition

Arbeitspapier

We study interfirm price competition in the presence of horizontal and vertical intrafirm conflicts in each firm. Intrafirm conflicts are captured by a principal-agent framework with firms employing more than one agent and implementing a tournament incentive scheme. The principals offer premium incentives in the sense of revenue shares to which agents react by proposing a sales price. Introducing such intrafirm conflicts results in higher prices and lower effort levels. Increasing the number of agents lowers the optimal surplus share of the agents as well as the individual effort and the sales prices. Firm profits first increase and then decrease when employing more and more agents suggesting that principals should employ an intermediate number of agents.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Jena Economic Research Papers ; No. 2011,042

Classification and Topics

• Classification: Wirtschaft ; Noncooperative Games ; Firm Organization and Market Structure ; Personnel Economics: Compensation and Compensation Methods and Their Effects
• Subject: price competition ; agency theory ; Vergütungssystem ; Extensives Spiel ; Betrieblicher Konflikt ; Preiswettbewerb ; Prinzipal-Agent-Theorie ; Leistungsentgelt ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Güth, Werner ; Pull, Kerstin ; Stadler, Manfred
• Event: Veröffentlichung
• (who): Friedrich Schiller University Jena and Max Planck Institute of Economics
• (where): Jena
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/56917
• Last update: 10.03.2025, 11:44 AM CET