Essays on managerial incentives and product-market competition

Abstract: This dissertation consists of four self-contained essays primarily concerned with incorporating the objectives of real world top managers, as revealed by the available empirical evidence, in supergame-theoretic analyses of long-term competition between oligopolistic firms.The first essay, "Ownership, Control, and Collusion", considers how the separation between ownership and control affects firms' competitive attitudes when top managers have the preference for smooth profit streams revealed by the evidence on "income smoothing" and when managerial compensation has the low pay-performance sensitivity found in many empirical studies.In a similar fashion, the second essay, "Stock-Related Compensation and Product-Market Competition", deals with the effects of the apparently more aggressive managerial incentives linked to stock price (e.g. stock options), which have become increasingly common in the U.S., on long-term oligopolistic competition.In the third paper, "Debt as a (Credible) Collusive Device", shareholders’ commitments to reduce conflicts with debtholders by choosing a top manager with a highly valuable reputation or with "conservative" incentives are considered. These forms of commitment have been shown to reduce the (agency) cost of debt finance; this paper characterizes their effects on the relation between firms' capital structure and product market competition.The fourth paper, "Multimarket Contact, Concavity, and Collusion", addresses the relation between multimarket contact and firms’ ability to sustain collusive behavior in repeated oligopolies. It explores how this relation is affected by the strict concavity of firms’ objective function induced by managerial objectives and by other features of reality, discusses the effects of conglomeration and horizontal mergers, and extends the results to non-oligopolistic supergames.