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Mutual Funds Make Air Travel More Expensive

How accurately competence this work? It might be that managers of institutional investors put vigour on a managers of a companies that they own, perfectionist that they don’t try to undercut a prices of their competitors. If a mutual account owns shares of United and Delta, and United and Delta are a usually competitors on certain routes, afterwards a mutual account advantages if United and Delta refrain from cost competition. The managers of United and Delta have no reason to conflict such demands, as they, too, as shareholders of their possess companies, advantage from a aloft increase from price-squeezed passengers. Indeed, it is probable that managers of companies don’t need to be told categorically to exaggerate passengers since they already know that it’s in their bosses’ interest, and hence their own. Institutional investors can also get a outcomes they wish by structuring a remuneration of managers in pointed ways. For example, they can prerogative managers formed on a batch cost of their possess firms—rather than benchmarking compensate opposite how good they perform compared with attention rivals—which discourages managers from competing with a rivals.

Article source: http://www.slate.com/articles/news_and_politics/view_from_chicago/2015/04/mutual_funds_make_air_travel_more_expensive_institutional_investors_reduce.html

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