Compensation and Bargaining with Entrpreneurship as the Outside Option

Arbeitspapier

We analyze the impact of entrepreneurship as an outside option on compensation contracts between a principal and an agent with bargaining power. In the first stage the parties bargain over the base wage and the profit share. In the second stage the principal determines the capital investment and the agent decides on effort. It is shown that while negotiated base wage increases in the degree of the competitiveness in the market for outside equity funding, the profit share is invariant both to the imperfections prevailing in the equity market and to the relative bargaining power of the negotiating parties.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 314

Classification and Topics

• Classification: Wirtschaft
• Subject: Wage bargaining ; outside option ; entrepreneurship

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Koskela, Erkki ; Stenbacka, Rune
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2000

Further information

• Handle: http://hdl.handle.net/10419/75575
• Last update: 10.03.2025, 11:42 AM CET