Too Few Cooks Spoil the Broth: Division of Labor and Directed Production
AbstractHow can a manager influence workers' activity, while knowing little about it? This paper examines a situation where production requires several tasks, and the manager wants to direct production to achieve a preferred allocation of effort across tasks. However, the effort that is required for each task cannot be observed, and the production result is the only indicator of worker activity. This paper illustrates that in this situation, the manager cannot implement the preferred allocation with a single worker. On the other hand, the manager is able to implement the preferred allocation by inducing a game among several workers. Gains to workers from collusion may be eliminated by an ability-dependent, but potentially inefficient, task assignment. These findings provide a new explanation for the division of labor, and bureaucratic features such as ``over"-specialization and ``wrong" task allocation.
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Bibliographic InfoArticle provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.
Volume (Year): 8 (2008)
Issue (Month): 1 (August)
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Other versions of this item:
- Schnedler, Wendelin & Ratto, Marisa, 2008. "Too Few Cooks Spoil the Broth : Division of Labor and Directed Production," Economics Papers from University Paris Dauphine 123456789/6986, Paris Dauphine University.
- Marisa Ratto & Wendelin Schnedler, 2008. "Too Few Cooks Spoil the Broth: Division of Labour and Directed Production," Working Papers 0468, University of Heidelberg, Department of Economics, revised Jul 2008.
- D02 - Microeconomics - - General - - - Institutions: Design, Formation, and Operations
- D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
- M54 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Labor Management
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
- J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
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