Product-Market Competition and Managerial Slack

David Scharfstein

RAND Journal of Economics, 1988, vol. 19, issue 1, 147-155

Abstract: This article analyzes the effect of product-market competition on managerial incentives. In contrast to Hart (1983a), I show that competition may actually exacerbate the incentive problem. The difference in results derives from our different assumptions about managerial preferences. The importance of assumptions about preferences suggests that we do not yet understand the precise mechanism through which competition affects incentives.

Date: 1988
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