Incentives, Identity, and Organizational Forms
AbstractAbstract This paper studies the optimal organizational form and the optimal type of manager by considering the nonmaterial (psychological) payoff as well as the standard material payoff for agents. I compare two organizational forms: T-form, where all agents have the same job title so that they are in a single reference group; and H-form, where one agent is appointed to be the manager and the others are subordinates who form a reference group. I show that the principal should appoint a more (less) able agent to be the manager when the effects of peer pressure are more (less) critical. In addition, I find the conditions under which H-form is more likely to be preferred to T-form. Finally, I discuss the phenomenon of the proliferation of job titles in the context of this model.
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Bibliographic InfoPaper provided by School of Economics, Kwansei Gakuin University in its series Discussion Paper Series with number 47.
Length: 20 pages
Date of creation: Jul 2009
Date of revision: Jul 2009
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Principal-agent Model; Multiagents; Moral Hazard; Reference Group; Peer Pressure; Identity; Proliferation of Job Titles.;
Find related papers by JEL classification:
- B49 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Other
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
- M12 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Personnel Management; Executives; Executive Compensation
- M54 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Labor Management
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-08-02 (All new papers)
- NEP-BEC-2009-08-02 (Business Economics)
- NEP-CBE-2009-08-02 (Cognitive & Behavioural Economics)
- NEP-CTA-2009-08-02 (Contract Theory & Applications)
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