Competition Reduces X-Inefficiency - A Note on a Limited Liability Mechanism
The 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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|Date of creation:||1995|
|Date of revision:|
|Contact details of provider:|| Postal: UNIVERSITY OF STOCKHOLM, INSTITUTE FOR INTERNATIONAL ECONOMIC STUDIES, S- 106 91 STOCKHOLM SWEDEN.|
Web page: http://www.iies.su.se/
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- Benjamin E. Hermalin, 1992.
"The Effects of Competition on Executive Behavior,"
RAND Journal of Economics,
The RAND Corporation, vol. 23(3), pages 350-365, Autumn.
- Benjamin E. Hermalin., 1991. "The Effects of Competition on Executive Behavior," Economics Working Papers 91-182, University of California at Berkeley.
- Hermalin, Benjamin E., 1991. "The Effects of Competition on Executive Behavior," Department of Economics, Working Paper Series qt7m13v5dd, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Horn, Henrik & Lang, Harald & Lundgren, Stefan, 1994.
"Competition, long run contracts and internal inefficiencies in firms,"
European Economic Review,
Elsevier, vol. 38(2), pages 213-233, February.
- Horn, H. & Lang, H. & Lundgren, S., 1991. "Competition, Long Run Contracts and Internal Inefficiencies in Firms," Papers 506, Stockholm - International Economic Studies.
- Nalebuff, Barry J & Stiglitz, Joseph E, 1983. "Information, Competition, and Markets," American Economic Review, American Economic Association, vol. 73(2), pages 278-83, May.
- Klaus M. Schmidt, 1997. "Managerial Incentives and Product Market Competition," Review of Economic Studies, Oxford University Press, vol. 64(2), pages 191-213.
- Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
- Horn, H. & Lang, H. & Lundgren, S., 1991.
"Managerial Effort Incentives, X-Inefficiency and International Trade,"
507, Stockholm - International Economic Studies.
- Horn, Henrik & Lang, Harald & Lundgren, Stefan, 1995. "Managerial effort incentives, X-inefficiency and international trade," European Economic Review, Elsevier, vol. 39(1), pages 117-138, January.
- Martin Stephen, 1993. "Endogenous Firm Efficiency in a Cournot Principal-Agent Model," Journal of Economic Theory, Elsevier, vol. 59(2), pages 445-450, April.
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