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 Stockholm University, Institute for International Economic Studies in its series Seminar Papers with number 599.
Length: 29 pages
Date of creation: 30 Oct 1997
Date of revision:
Contact details of provider:
Postal: Institute for International Economic Studies, Stockholm University, S-106 91 Stockholm, Sweden
Web page: http://www.iies.su.se/
More information through EDIRC
financial restriction; efficiency of a firm; disciplining power;
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, J., 1995. "Competition Reduces X-Inefficiency : A Note on a Limited Liability Mechanism," Discussion Paper 1995-56, Tilburg University, Center for Economic Research.
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
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.:
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