Cooperative managerial delegation revisited: Including the firm's cost as a managerial objective

In this study, we revisit cooperative managerial delegation when firms choose both the level of output and R&D investment in an oligopolistic competition. A previous study concludes that if managers choose the output and R&D levels, the fully collusive outcome cannot be achieved through cooperative managerial delegation. By contrast, we show that when owners cooperatively offer managers an incentive scheme consisting of a linear combination of profit, revenue, and cost, they can achieve the fully collusive outcome. The result suggests that firms require a more elaborate incentive scheme to achieve the collusion outcome by controlling both strategic variables.