Internal Rent-Seeking and Optimal Firm Size∗
نویسنده
چکیده
This paper discusses the optimal firm size in the presence of internal rent seeking. Since firm size has a discouragement effect on the level of individual rent-seeking but also a quantity effect as the number of rent-seekers increases, the interplay of both effects — together with technological considerations — determines whether the employer chooses an inefficiently small or large firm size. Introduction of a works council restores efficiency although it is purely used as a collective rent-seeking device.
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