It is often argued that competition in the product market reduces managerial slack. We formalize this idea. Suppose that there is a common component to firms' costs, i.e., as one firm's (total and marginal) costs fall, so do those of other firms. Then when costs fall, profit-maximizing firms expand. This reduces product prices and gives the manager of a nonprofit-maximizing firm less opportunity for discretionary behavior than if his firm's costs had fallen alone and produce prices had not changed. Hence average managerial slack is lower under competition than if there is a single nonprofit-maximizing monopolistic firm.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
For technical questions regarding this item, or to correct its listing, contact: ().
Related research
Keywords:
Other versions of this item:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.) This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.