Productivity and credibility in industry equilibrium

Michael Powell*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

I analyze a model of production in a competitive environment with heterogeneous firms. Efficient production requires individuals within the organization to take noncontractible actions for which rewards must be informally promised rather than contractually assured. The credibility of such promises originates from a firm's future competitive rents. In equilibrium, heterogeneous firms are heterogeneously constrained, and competitive rents are inefficiently concentrated at the top. I explore several policy and empirical implications of this result.

Original languageEnglish (US)
Pages (from-to)121-146
Number of pages26
JournalRAND Journal of Economics
Volume50
Issue number1
DOIs
StatePublished - Mar 1 2019

ASJC Scopus subject areas

  • Economics and Econometrics

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