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Hedonic prices and multidimensional incentives

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Author Info
Masaki Nakabayashi () (Graduate School of Economics, Osaka University)
Abstract

Human tasks are often multidimensional. Holmstrom and Milgrom (1991) concluded that ghigh-poweredh incentives cannot work unless all dimensions of these tasks are observable in the firm. However, as this study shows, if the firm can observe the price vector of its products in the market, distinguish each dimension of the price vector, and connect the information with signals from workers in the firm, then the use of multidimensional ghigh-poweredh incentives becomes feasible. Product differentiation with committed quality satisfies those conditions, which has been practiced by the Japanese, but not by the Western, manufacturing for a century.

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Publisher Info
Paper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 05-32-Rev.2.

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Length: 31 pages
Date of creation: Dec 2005
Date of revision: May 2006
Handle: RePEc:osk:wpaper:0532r2

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Web page: http://www.econ.osaka-u.ac.jp/
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Related research
Keywords: multidimensional incentives; multitask incentives; high-powered incentives; hedonic prices; Japanese manufacturing.;

Find related papers by JEL classification:
L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
N65 - Economic History - - Manufacturing and Construction - - - Asia including Middle East

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