Abstract
Cost heterogeneity is an important source of performance disparity among firms. This heterogeneity conditions the strategic decisions that firms make in the product market and can lead to heterogeneity in the design of managerial compensation contracts. I investigate the effect of cost heterogeneity in a strategic product market environment where firms compete à la Cournot. The paper offers new predictions on how executive compensation contracts that account for relative performance must be adjusted for cost differences.
Original language | English |
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Pages (from-to) | 80-85 |
Number of pages | 6 |
Journal | Finance Research Letters |
Volume | 7 |
Issue number | 2 |
DOIs | |
Publication status | Published - Jun 2010 |
Externally published | Yes |
Keywords
- Cost heterogeneity
- Firm heterogeneity
- Managerial compensation
- Relative performance evaluation
- Strategic decisions