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Division of Labour and Directed Production

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Author Info
Marisa Ratto
Wendelin Schnedler ()

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Abstract

We examine a situation where efforts on different tasks positively affect production but are not separately verifiable and where the manager (principal) and the worker (agent) have different ideas about how production should be carried out: agents prefer a less efficient way of production. We show that by dividing labour (assigning tasks to different agents and verifying that agents do not carry out tasks to which they are not assigned), it is possible for the principal to implement the efficient way of production. Colluding agents can undermine this implementation. However, if agents have different abilities, collusion can be prevented by a specific assignment of agents tasks.

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File URL: http://www.bris.ac.uk/Depts/CMPO/workingpapers/wp126.pdf
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Publisher Info
Paper provided by Department of Economics, University of Bristol, UK in its series The Centre for Market and Public Organisation with number 05/126.

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Length: 22 pages
Date of creation: Jul 2005
Date of revision:
Handle: RePEc:bri:cmpowp:05/126

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Related research
Keywords: hidden action moral hazard specialisation job design

Other versions of this item:

Find related papers by JEL classification:
L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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References listed on IDEAS
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    Other versions:
  5. 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. [Downloadable!] (restricted)
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  6. Strausz, Roland, 1997. "Delegation of Monitoring in a Principal-Agent Relationship," Review of Economic Studies, Blackwell Publishing, vol. 64(3), pages 337-57, July. [Downloadable!] (restricted)
    Other versions:
  7. Canice Prendergast, 2003. "The Limits of Bureaucratic Efficiency," Journal of Political Economy, University of Chicago Press, vol. 111(5), pages 929-958, October. [Downloadable!] (restricted)
  8. Susan Athey & John Roberts, 2001. "Organizational Design: Decision Rights and Incentive Contracts," American Economic Review, American Economic Association, vol. 91(2), pages 200-205, May. [Downloadable!] (restricted)
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    Other versions:
  10. repec:rus:hseeco:124059 is not listed on IDEAS
  11. Simon Burgess & Marisa Ratto, 2003. "The Role of Incentives in the Public Sector: Issues and Evidence," Oxford Review of Economic Policy, Oxford University Press, vol. 19(2), pages 285-300, Summer.
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    Other versions:
  14. Simon Burgess & Marisa Ratto, 2003. "The Role of Incentives in the Public Sector: Issues and Evidence," The Centre for Market and Public Organisation 03/071, Department of Economics, University of Bristol, UK. [Downloadable!]
  15. Robert Gibbons & Kevin J. Murphy, 1992. "Optimal Incentive Contracts in the Presence of Career Concerns: Theory and Evidence," NBER Working Papers 3792, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  16. Itoh, Hideshi, 1991. "Incentives to Help in Multi-agent Situations," Econometrica, Econometric Society, vol. 59(3), pages 611-36, May. [Downloadable!] (restricted)
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