Discouraging Rivals: Managerial Rent-Seeking and Economic Inefficiencies

52 Pages Posted: 23 Jan 2002

See all articles by Aaron S. Edlin

Aaron S. Edlin

University of California at Berkeley; National Bureau of Economic Research (NBER)

Joseph E. Stiglitz

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Date Written: August 1992

Abstract

We argue here for a broader view of the biases in managers' decisions: In general, managerial rent-seeking affects not only the level of investment, but also the form. Our basic hypothesis is simple: given the now well-established scope for managerial discretion, managers have an incentive to exercise that discretion to enhance their income. Any managerial contract is subject to renegotiation, and a manager's pay is the outcome of an often bewildering bargaining process between management, the board of directors, and rival management teams or takeover artists.

Suggested Citation

Edlin, Aaron S. and Stiglitz, Joseph E., Discouraging Rivals: Managerial Rent-Seeking and Economic Inefficiencies (August 1992). NBER Working Paper No. w4145. Available at SSRN: https://ssrn.com/abstract=227981

Aaron S. Edlin

University of California at Berkeley ( email )

Dept of Economics 549 Evans Hall #3880
Berkeley, CA 94720
United States
510-642-4719 (Phone)
510-643-0413 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Joseph E. Stiglitz (Contact Author)

Columbia Business School - Finance and Economics ( email )

3022 Broadway
814 Uris Hall
New York, NY 10027
United States
(212) 854-0671 (Phone)
(212) 662-8474 (Fax)

HOME PAGE: http://www.josephstiglitz.com

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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