Hidden action, identification and organisation design
AbstractIncentives often fail in inducing economic agents to engage in a desirable activity; implementability is restricted. What restricts implementability? When does re-organization help to overcome this restriction? This paper shows that any restriction of implementability is caused by an identification problem. It also describes organizations that can solve this identfication problem and provides conditions under which such organisations exist. Applying the findings to established and new moral hazard models yields insights into optimal organization design, uncovers the reason why certain organization designs, such as advocacy or specialization, overcome restricted implementability, and formalizes a widespread type of multi-tasking problem.
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Bibliographic InfoPaper provided by Department of Economics, University of Bristol, UK in its series The Centre for Market and Public Organisation with number 10/250.
Length: 38 pages
Date of creation: Nov 2010
Date of revision:
moral hazard; hidden action; implementation; multi-tasking; identification by organisation design;
Other versions of this item:
- Schnedler, Wendelin, 2010. "Hidden Action, Identification, and Organization Design," IZA Discussion Papers 5325, Institute for the Study of Labor (IZA).
- Schnedler, Wendelin, 2010. "Hidden Action, Identification, and Organization Design," Working Papers 0505, University of Heidelberg, Department of Economics.
- D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
- 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; Mechanism Design
- M41 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Accounting
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Macho-Stadler, Ines & Perez-Castrillo, J. David, 2001.
"An Introduction to the Economics of Information: Incentives and Contracts,"
Oxford University Press,
edition 2, number 9780199243273.
- Macho-Stadler, Ines & Perez-Castrillo, J. David, 2001. "An Introduction to the Economics of Information: Incentives and Contracts," OUP Catalogue, Oxford University Press, edition 2, number 9780199243259.
- Jenny Kragl & Anja Schöttner, 2012. "Wage Floors, Imperfect Performance Measures, and Optimal Job Design," Working Paper Series of the Department of Economics, University of Konstanz 2012-36, Department of Economics, University of Konstanz.
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