Firm competition and incentive pay: Rent seeking at work
Economics Letters, 2011, vol. 113, issue 2, 154-156
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.
Keywords: Payment methods; Competition; Rent seeking (search for similar items in EconPapers)
JEL-codes: J2 J3 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:113:y:2011:i:2:p:154-156
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