This paper examines the effect of imperfect labor market competition on the efficiency of compensation schemes in a …-dependent exit options for agents. In contrast to screening models with perfect competition, we find that existence of equilibria … that the efficiency of variable pay depends on the degree of competition for agents: For small degrees of competition, low …

to higher school productivity. We discuss the evidence in this area, concluding that the impact of competition has proven … to be more mixed and modest than expected. We suggest that this in fact should not be surprising, since economic theory … on incentives and incomplete contracts (beginning with many contributions also from the 1950s) leads to a more nuanced …