In the first stage prot maximizing owners choose incentive schemes in order to induce their managers to exhibit a certain type of behavior. In the second stage the managers compete either in prices or in quantities. Basing the manager's objective function on a convex combination of own profit and the difference between own profit and the rival firm's profit is sufficient for the equivalence result to hold. Managerial Economics and Decision Sciences, J.L. Kellogg Graduate School of Management, Northwestern University. The authors thank Bill Sandholm, Daniel Spulber, and Jeroen Swinkels for helpful comments.
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