Product Market Competition, Managerial Compensation, and Firm Size in Market Equilibrium

• 成果类型: Article
• 署名作者: Subramanian, Ajay
• 署名单位: University System of Georgia; Georgia State University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.1120.1650
• 发表日期: 2013
• 页码: 1612-1630
• 关键词: product market competition; Managerial compensation; firm size; Market equilibrium

摘要

We develop a tractable equilibrium model of competing firms in an industry to show how the distribution of firm qualities, moral hazard, and product market characteristics interact to affect firm size, managerial compensation, and market structure. Different determinants of product market competition have contrasting effects on firm size and managerial compensation. Although both firm size and managerial compensation increase with the entry cost, they increase with the elasticity of substitution if and only if firm size exceeds a high threshold but decrease if it is below a low threshold. Aggregate shocks to the firm productivity distribution affect incentives in our equilibrium framework. We show statistically and economically significant empirical support for several hypotheses derived from the theory that relates product market characteristics to managerial compensation, firm size, and the number of firms in the industry Different determinants of competition indeed have contrasting effects, as predicted by the theory.