Product Market Competition, Managerial Compensation, and Firm Size in Market Equilibrium
构建了一个行业竞争均衡模型，分析企业质量分布、道德风险和产品市场特征如何共同影响企业规模、管理层薪酬和市场结构，并利用数据验证了理论预测。
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. This paper was accepted by Brad Barber, finance.