In this experiment, we analyze strategic delegation in a Cournot duopoly.
Owners can choose among two different contracts which determine their managers' salaries.
One contract simply gives managers incentives to maximize firm profits, while the second contract gives an additional sales bonus. Although theory predicts the second contract to be chosen, it is only rarely chosen in the experimental markets. This behavior is rational given that managers do not play according to the subgame perfect equilibrium prediction when asymmetric contracts are given. The paper is available as a an Adobe Acrobat PDF File. You will require the Acrobat Reader to read it and to print it out.