Elementary Theory of Slack-ridden Imperfect Competition

Organisational slack is a central variable in the behavioural theory of the firm (Cyert and March, 1963). Ever since Leibenstein (1966) described organisational slack under the name of ‘X-inefficiency’, the pervasiveness of the phenomenon has caught the attention of many economists. In his book Beyond Economic Man Leibenstein (1976) discusses a number of empirical studies which show the importance of organisational slack. However, present-day textbooks on microeconomics almost ignore the concept, as does most of the literature on formal models of imperfect competition.