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1. Availability of finance. Certain decisions will be rejected because they cost too much

2. Existing Business/Company Policy. It is not always practical to re-write

business policy to accommodate one decision

3. People's behavior, abilities and feelings. A decision cannot be taken if it assumes higher skills than employees actually have, or if the decision is so unpopular no-one

will work properly on it.


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Q: Internal constraints that restrict a manager's decision options?
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What is meant by debt as a disciplinary mechanism?

Given the fact that debt has to be repaid and interest has to be paid, having corporate debt on the balance sheet forces managers to provide enough cash flows to service the debt obligations. Thus, these cash flows go to the debt holders and cannot be used for perks for the managers or for unprofitable empire building. Furthermore, debt covenants can restrict managers in their (self interest maximizing) decisions. Finally, if debt is provided by a large e.g. institutional lender, this lender may have such a large stake in the firm that the lender acts as a valuable monitor


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It is called a cartel or cooperative oligopolies or duopolies. They usually restrict output and raise prices for their mutually benefit at the expense of the consumer.

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