Monopoly Power and Expense-Preference Behavior: Theory and Evidence to the Contrary
The expense-preference theory of the firm implies that in noncompetitive product markets, managers hire labor beyond the profit-maximizing level. This theory has recently received empirical support from Edwards (1977) and Hannan and Mavinga (1980). In this article it is shown that for expense-preference behavior to exist, the effectiveness of the technology for conflict control between shareholders and managers must be related to market structure, which is a tenuous proposition. Further, once differences in monitoring costs due to variation in firm size are controlled for, the empirical evidence supports managerial profit-maximizing rather than expense-preference behavior.
Year of publication: |
1983
|
---|---|
Authors: | Smirlock, Michael ; Marshall, William |
Published in: |
Bell Journal of Economics. - The RAND Corporation, ISSN 0361-915X. - Vol. 14.1983, 1, p. 166-178
|
Publisher: |
The RAND Corporation |
Saved in:
Online Resource
Saved in favorites
Similar items by person
-
Tobin's q and the Structure-Performance Relationship: Reply.
Smirlock, Michael, (1986)
-
Tobin's q and the Structure-Performance Relationship.
Smirlock, Michael, (1984)
-
Scale and scope economies in the multi-product banking firm
Gilligan, Thomas, (1984)
- More ...