@article{ae85d2661b374fa0b7be2e21fb35f04e,
title = "Productivity and credibility in industry equilibrium",
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.",
author = "Michael Powell",
note = "Funding Information: ∗Northwestern University; mike-powell@kellogg.northwestern.edu. This article is a revised chapter of my MIT PhD. thesis. I am indebted to Robert Gibbons for his advice. This article has benefitted from the suggestions of Daron Acemoglu, Abhijit Banerjee, Daniel Barron, David Berger, Nick Bloom, Dan Cao, Ricardo Caballero, Cheng Chen, Sebastian di Tella, Glenn Ellison, Matthias Fahn, Luis Garicano, Jean-Paul L{\textquoteright}Huillier, Hongyi Li, Niko Matouschek, Iuliana Pascu, Michael Peters, Andrea Prat, Luis Rayo, Alp Simsek, Jeroen Swinkels, Chad Syverson, Steven Tadelis, Heiwai Tang, Eric Van den Steen, Xiao Yu Wang, and seminar participants at Caltech (2012), Chicago (2013), Columbia (2012), Duke (2012), HKU (2015), LSE (2012), MIT (2012), Northwestern (2012), NYU (2012), Queen{\textquoteright}s (2013), Rochester (2012), Stanford (2012), Toronto (2013), UPenn (2012), and USC (2012). I am grateful to Mark Armstrong and two anonymous referees for their valuable suggestions. I thank MIT Sloan{\textquoteright}s Program on Innovation in Markets and Organizations and the National Science Foundation for financial support. Publisher Copyright: {\textcopyright} 2019, The RAND Corporation.",
year = "2019",
month = mar,
day = "1",
doi = "10.1111/1756-2171.12264",
language = "English (US)",
volume = "50",
pages = "121--146",
journal = "RAND Journal of Economics",
issn = "0741-6261",
publisher = "Rand Journal of Economics",
number = "1",
}