‘Green’ managerial delegation theory

Abstract This article develops a non-cooperative game with managerial quantity-setting firms in which owners choose whether to delegate output and abatement decisions managers through contract based on emissions (conventionally denoted as ‘green’ delegation, GD) instead of sales (sales SD), the government levies an tax incentivise firms’ emissions-reduction actions. First, it compares Nash equilibrium outcomes between GD SD then contrasts them also profit maximisation (PM). A plethora equilibria emerges, especially case versus PM (the ‘green delegation game’), depending public awareness toward environmental quality, ranging from coordination prisoner's dilemma. Second, though under incentivises for emissions, damage is lower than SD. because optimal more compensates incentive emissions. These findings suggest that designing contracts paradoxically favours quality.