Division of Labour and Directed Production

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Division of Labour and Directed Production

Author Info

Marisa Ratto (CMPO, University of Bristol)
Wendelin Schnedler () (University of Heidelberg and IZA Bonn)

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Wendelin Schnedler

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 to tasks.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1669.

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Length: 25 pages
Date of creation: Jul 2005
Date of revision:
Handle: RePEc:iza:izadps:dp1669

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Paper
- Marisa Ratto & Wendelin Schnedler, 2005. "Division of Labour and Directed Production," The Centre for Market and Public Organisation 05/126, Department of Economics, University of Bristol, UK. [Downloadable!]
- Marisa Ratto & Wendelin Schnedler, 2005. "Division of Labour and Directed Production," Working Papers 0421, University of Heidelberg, Department of Economics, revised Jul 2005. [Downloadable!]

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

This paper has been announced in the following NEP Reports:

NEP-ALL-2005-07-18 (All new papers)
NEP-LAB-2005-07-18 (Labour Economics)

References listed on IDEAS
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