Michael Raith

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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)
We analyze how the availability of internal funds affects a firm’s investment. We show that under fairly standard assumptions, the relation is U-shaped: investment increases monotonically with internal funds if they are large but decreases if they are very low. We discuss the tradeoff that generates the U-shape, and argue that models predicting an always(More)
If managers and their subordinates have the same basic qualifications, then organizations can benefit from replacing unproductive superiors with more productive subordinates. In response to this threat, superiors may deliberately recruit unproductive subordinates, or abuse their personnel authority in other ways, in order to protect themselves. We show that(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 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)
This paper analyzes the interaction of financing and output market decisions in a duopoly in which one firm is financially constrained and can borrow funds to finance production costs. Two ideas have been analyzed separately in previous work: some authors argue that debt strategically affects a firm’s output market decisions, typically making it more(More)
We study financial contracting when both an entrepreneur’s investment and the resulting revenue are unobservable to an outside investor. We show that a debt contract is always optimal; repayment is induced by a liquidation threat that increases with the extent of default. Moreover, when the entrepreneur’s decision concerns the scale of his project, a(More)
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 profits. Using data on(More)