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Firm competition and incentive pay: Rent seeking at work

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  • Priks, Mikael

Abstract

Empirical evidence shows that competition among firms generates steep incentives inside firms. Incentive pay stimulates productive investments but may generate inefficient rent-seeking investments. I show that competition reduces firms’ profits and thereby the inefficient investments, which makes steep incentives attractive.

Suggested Citation

  • Priks, Mikael, 2011. "Firm competition and incentive pay: Rent seeking at work," Economics Letters, Elsevier, vol. 113(2), pages 154-156.
  • Handle: RePEc:eee:ecolet:v:113:y:2011:i:2:p:154-156
    DOI: 10.1016/j.econlet.2011.06.006
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    References listed on IDEAS

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    More about this item

    Keywords

    Payment methods; Competition; Rent seeking;

    JEL classification:

    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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