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This paper examines how the degree of competition among firms in an industry affects the optimal incentives that firms provide to their managers. A central assumption is that there is free entry and exit in the industry, which implies that changes in the nature of competition lead to changes in the equilibrium market structure. The main result is that as(More)
Lu Zhang for very useful comments and suggestions. We also thank the Social Sciences and Humanities Research Council of Canada (SSHRC) for financial support. Abstract This paper examines how the investment of financially constrained firms varies with their level of internal funds. We develop a theoretical model of optimal investment under financial(More)
Any opinions expressed here are those of the author(s) and not those of the institute. Research disseminated by IZA may include views on policy, but the institute itself takes no institutional policy positions. The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between(More)
We analyze effects of performance measure properties (controllable and uncontrollable risk, distortion, and manipulation) on incentive plan design, using data from auto dealership manager incentive systems. Dealerships put the most weight on measures that are " better " with respect to these properties. Additional measures are more likely to be used for a(More)
This paper studies the optimal allocation of decision rights between an uninformed principal and an informed agent when interdependent activities need to be adapted to local conditions. While the principal cares only about overall pro…ts the agent may favor higher, or lower, levels for each activity than the pro…t-maximizing level. The principal has limited(More)
y Abstract In this paper I estimate platform markups in two-sided markets using structural models of platform demand. My models and estimation procedure are applicable to general two-sided market settings where agents on each side care about the presence of agents on the other side and platforms set two membership prices to maximize the sum of pro…ts. Using(More)
of this paper circulated as Friebel and Raith (1999). We would like to thank Patrick Bolton, Mathias Dewatripont, Canice Prendergast and Gérard Roland for their encouragement and advice. The comments and suggestions of the editor and the referees substantially helped to improve the paper. We also benefited from many helpful comments by Stole, Jean Tirole(More)
This paper studies how the investment of a financially constrained firm responds to changes in the constraints it faces. We distinguish between changes in the firm's internal funds and changes in the extent of asymmetric information between the firm and an outside investor. The financial contract between firm and investor, and thus the cost of raising(More)