|Schmidt, Klaus M. (1997): Managerial Incentives and Product Market Competition. In: Review of Economic Studies, Vol. 64, No. 2: pp. 191-213|
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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.
Economics > Chairs > Seminar for Economic Theory
|Subjects:||300 Social sciences > 330 Economics|
|Deposited On:||15. Apr 2014 08:53|
|Last Modified:||29. Apr 2016 09:17|
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