We model a firm in an institutional market setting, consisting of a production technology and its governance. The governance consists of a hierarchical firm structure, a cost efficiency parameter,and an internal pay system. The depth of the firm is determined by profit maximization under the...

This paper looks at a general equilibrium model in a setting with indivisible consumer goods, product market power and a labor market distortion. The labor market distortion is due to wages being independent of ability in the indivisible good sector. This independence could be due to a...

Economic disruptions generally create winners and losers. The compensation problem consists of designing a reform of the existing income tax system that offsets the welfare losses of the latter by redistributing the gains of the former. We derive a formula for the compensating tax reform and its...