SFB 303 Discussion Paper No. A - 265
Author: Kamecke, Ulrich
Title: The Role of Competition for an X-Inefficient Organization
Abstract: The paper presents a manager controled firm which does not minimize
long run costs even though there is no moral hazard problem involved and the
mangager maximizes a profit depending salary. The inefficiency is caused by
competition in the job market since the manager uses some of his freedom
inside the firm to protect himself against rivals when he decides on matters
that affect the firm's profitability in the time after his salary is
renegotiated. The inefficiency is limited by competition in the output
market.
Keywords:
JEL-Classification-Number:
Creation-Date: December 1989
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