2003/01/01 by Brian Sallans, Sallans, Brian, Alexander Pfister +3
Decision Sciences · Economics, Econometrics and Finance · #Complex Systems and Time Series Analysis #Economic theories and models #Game Theory and Applications
paper · pdf · doi:10.57938/a43808f4-489e-4cb6-be96-5cb519c50fe0
openalex publication_date 2003/01/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/23
A computational economics model of managerial compensation is presented. Risk-averse managers are simulated, and shown to adopt more risk-taking under the influence of stock options. It is also shown that stock options can both help a new entrant compete in an established market; and can help the incumbent firm fight off competition by promoting new exploration and risk-taking. In the case of the incumbent, the stock options are shown to be most effective when introduced as a response to the arrival of a new entrant, rather than used as a standard part of the compensation package. (author's abstract)