TY  - RPRT
        AU  - Kräkel, Matthias
        TI  - On the “Adverse Selection” of Organizations
        PY  - 2006/Oct/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 2396
        UR  - https://www.iza.org/index.php/publications/dp2396
        AB  - According to New Institutional Economics, two or more individuals will found an organization, if it leads to a benefit compared to market allocation. A natural consequence will then be internal rent seeking. We discuss the interrelation between profits, rent seeking and the foundation of organizations. Typically, we expect that highly profitable firms are always founded but it is not clear whether the same is true for firms with less optimistic prospects. We will show that internal rent seeking may lead to a completely reversed result. The impact of internal rent seeking on overall investment and the implications of firm size and competition on the foundation of organizations are also addressed.
        KW  - internal rent seeking
KW  - foundation of organizations
KW  - contests
        ER  -