Managerial Incentives and Product Market Competition

Schmidt, Klaus M. (1997): Managerial Incentives and Product Market Competition. In: Review of Economic Studies, Bd. 64, Nr. 2: S. 191-213

Abstract

The paper shows that an increase in competition has two effects on managerial incentives: It increases the probability of liquidation, which has a positive effect on managerial effort, but it also reduces the firm’s profits, which may make it less attractive to induce high effort. Thus, the total effect is ambiguous. I identify natural circumstances where increasing competition unambiguously reduces managerial slack. In general, however, this relation need not be monotonic. A simple example demonstrates that-starting from a monopoly-managerial effort may increase as additional competitors enter the market, but will eventually decrease when competition becomes too intense.

• Dokumententyp: Zeitschriftenartikel
• Fakultät: Volkswirtschaft ; Volkswirtschaft > Lehrstühle > Seminar für Wirtschaftstheorie
• Themengebiete: 300 Sozialwissenschaften > 330 Wirtschaft
• Sprache: Englisch