Edmans, Alex (contributor); Gabaix, Xavier (contributor); … - 2008
assume that S > w , where S is the �rm�s market capitalization:
the �rm value gains from high e�ort exceed the manager�s … incentive pay in partial equilibrium). Fix the manager�s expected pay at
w and assume < 1 (the cost of e�ort is not too strong … salary, f ,
and P0 worth of shares, with:
P0 = w ; (4)
f = w(1 ); (5)
where is the unit cost of e�ort. The manager�s …