Discouraging Rivals: Managerial Rent-Seeking and Economic Inefficiencies

52 Pages Posted: 23 Jan 2002 Last revised: 1 May 2022

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 University - Columbia Business School, Finance; 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 )

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Joseph E. Stiglitz (Contact Author)

Columbia University - Columbia Business School, Finance ( email )

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