Competition Reduces X-Inefficiency : A Note on a Limited Liability Mechanism
AbstractThe study illustrates that a financial restriction may serve as a disciplining device on the internal efficiency of a firm, and that the disciplining power is higher the tougher the product market competition is. The financial restriction is modeled as a limited liability constraint, that is a non-negative profit constraint. Hence, this limited liability mechanism may, in part, account for the disciplining power of product market competition on firm efficiency, alleged by policy makers as well as economists.
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Bibliographic InfoPaper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 1995-56.
Date of creation: 1995
Date of revision:
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Web page: http://center.uvt.nl
Other versions of this item:
- Stennek, J., 1995. "Competition Reduces X-Inefficiency - A Note on a Limited Liability Mechanism," Papers 599, Stockholm - International Economic Studies.
- Stennek, Johan, 1997. "Competition Reduces X-Inefficiency - A note on a Limited Liability Mechanism," Seminar Papers 599, Stockholm University, Institute for International Economic Studies.
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
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