), we
hypothesize that a firm pays its manager i based on the estimated probability of her receiving a competing job offer from other
firms (denoted as pi), and in equilibrium (ex ante), manager i's compensation is positively associated with pi.1 Although it is difficult
to estimate pi empirically, we predict that it is positively correlated with the external employment opportunities of other managers
in the same firm: for example, pj of manager j who is in the same firm as manager i. Ex post, when manager j receives a better job