Competition Reduces X-Inefficiency: A Note on a Limited Liability Mechanism
1995 (English)Report (Other academic)
The study illustrates that a financial restriction may serve as a disciplining device on the internal efficiency of a firm, and that the disciplining power is higher the tougher the product market competition is. The financial restriction is modeled as a limited liability constraint, that is a non-negative profit constraint. Hence, this limited liability mechanism may, in part, account for the disciplining power of product market competition on firm efficiency, alleged by policy makers as well as economists.
Place, publisher, year, edition, pages
Stockholm: IIES , 1995. , 29 p.
Seminar Paper / Institute for International Economic Studies, Stockholm University, ISSN 0347-8769 ; 599
IdentifiersURN: urn:nbn:se:su:diva-40887OAI: oai:DiVA.org:su-40887DiVA: diva2:327087