Hart, Oliver D. - In: Bell Journal of Economics 14 (1983) 2, pp. 366-382
It is often argued that competition in the product market reduces managerial slack. We formalize this idea. Suppose that there is a common component to firms' costs, i.e., as one firm's (total and marginal) costs fall, so do those of other firms. Then when costs fall, profit-maximizing firms...