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Productivity and Credibility in Industry Equilibrium, RAND Journal of Economics

Abstract

I analyze a model of production in a competitive environment with heterogeneous firms. Efficient production requires individuals within the organization to take non-contractible actions for which rewards must be informally promised rather than contractually assured. The credibility of such promises emerges from a firm's future competitive rents. Equilibrium competitive rents are inefficient concentrated at the top. I explore several policy and empirical implications of this result.

Type

Article

Author(s)

Michael Powell

Date Published

2019

Citations

Powell, Michael. 2019. Productivity and Credibility in Industry Equilibrium. RAND Journal of Economics.(1): 121-146.

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