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Too Few Cooks Spoil the Broth: Division of Labour and Directed Production

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  • Marisa Ratto

    ()
    (Université Paris-Dauphine (SDFi))

  • Wendelin Schnedler

    ()
    (University of Heidelberg, Department of Economics)

Abstract

How 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 Info

Paper provided by University of Heidelberg, Department of Economics in its series Working Papers with number 0468.

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Length: 20 pages
Date of creation: Jul 2008
Date of revision: Jul 2008
Handle: RePEc:awi:wpaper:0468

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Keywords: specialization; job design; moral hazard; multitasking;

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References

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  2. Bengt Holmstrom, 1981. "Moral Hazard in Teams," Discussion Papers 471, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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  8. Lindbeck, Assar & Snower, Dennis J, 2000. "Multitask Learning and the Reorganization of Work: From Tayloristic to Holistic Organization," Journal of Labor Economics, University of Chicago Press, vol. 18(3), pages 353-76, July.
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Cited by:
  1. Schöttner, Anja & Kragl, Jenny, 2013. "Wage Floors, Imperfect Performance Measures, and Optimal Job Design," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79941, Verein für Socialpolitik / German Economic Association.
  2. Felipe Balmaceda, 2012. "On the Optimality of One-size-fits-all Contracts: The Limited Liability Case," Documentos de Trabajo 291, Centro de Economía Aplicada, Universidad de Chile.
  3. Chen, Bo, 2012. "All-or-nothing payments," Journal of Mathematical Economics, Elsevier, vol. 48(3), pages 133-142.
  4. Christian Espinosa & Juan Gorigoitía & Carlos Maquieira, 2012. "Nonlinear behaviour of EMBI index:the case of eastern European countries," Working Papers 37, Facultad de Economía y Empresa, Universidad Diego Portales.

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