Within most organizations, agents may spend time on a variety of tasks--productive and redistributive. In this paper, the author derives an optimal multitask incentive scheme under the assumption that agents have limited liability. The wage level is shown to increase with an agent's discretion and the organization's profits. With multiple agents, it is generally not optimal for the principal to fully eliminate distributional conflict within the organization. The resulting influence costs constitute a measure of X-inefficiency. The analysis illuminates the relationship between competition and influence costs, emphasizing the role of the organization's production technology. Copyright 1997 by The editors of the Scandinavian Journal of Economics.
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Volume (Year): 99 (1997) Issue (Month): 4 (December) Pages: 581-96 Download reference. The following formats are available: HTML
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Matthias Kräkel, 2006.
"On the "Adverse Selection" of Organizations,"
Discussion Papers
168, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
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