Sales Maximization and Specific Human Capital

Profit-maximizing owners of firms may find it optimal to provide managers with incentives to maximize sales in addition to profits. This influences the outcome of the bargaining game between workers and managers over workers' wages and helps to solve the problem of underinvestment by workers in...

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Bibliographic Details
Published in:The Rand journal of economics 1998, Vol.29 (4), p.790-802
Main Author: Zabojnik, Jan
Format: Article
Language:English
Subjects:
Bargaining
Bargaining power
Capital investments
Capital management
Contract management
Contracts
Economic incentives
Economic models
Education
Financial management
Human capital
Human resources
Investment
Investment strategies
Managerial skills
Managers
Ownership
Profit maximization
Profitability
Sales
Sales management
Securities sales
Studies
Wages
Wages & salaries
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Summary:Profit-maximizing owners of firms may find it optimal to provide managers with incentives to maximize sales in addition to profits. This influences the outcome of the bargaining game between workers and managers over workers' wages and helps to solve the problem of underinvestment by workers in specific human capital. I investigate optimal managerial contracts from this point of view and show that the optimal contract is a function of sales in addition to profits.
ISSN:0741-6261
1756-2171
DOI:10.2307/2556094