Werner Neus, Manfred Stadler

The Tragedy of the Common Holdings: Coordinated Manager Compensation and Price Competition

Volume 179 () / Issue 2, pp. 271-287 (17)
Published 11.05.2023

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We study price competition in a heterogeneous triopoly market where two firms are commonly owned by the same institutional shareholders, whereas the third firm is owned by independent shareholders.With such a mixed ownership structure the common owners have an incentive to coordinate their firms' behavior. In contrast to direct coordination of price decisions, delegation to managers enables indirect coordination via the designs of the manager compensation contracts. Compared to direct owner collusion, this more sophisticated type of indirect coordination leads to even higher firm profits and to an even higher loss of social welfare: the tragedy of common holdings.

Werner Neus Geboren 1959; Studium der Betriebswirtschaftslehre an der Universität Köln; 1988 Promotion; 1994 Habilitation; seit 1994 Professor für Betriebswirtschaftslehre in Tübingen.

Manfred Stadler ist o. Professor für VWL an der Universität Tübingen.