Hedonic prices and multidimensional incentives
AbstractHuman 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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper 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.
Length: 31 pages
Date of creation: Dec 2005
Date of revision: May 2006
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
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.:
- Slade, Margaret E, 1996. "Multitask Agency and Contract Choice: An Empirical Exploration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(2), pages 465-86, May.
- HOLMSTROM, Bengt, .
"Moral hazard and observability,"
CORE Discussion Papers RP, UniversitÃ© catholique de Louvain, Center for Operations Research and Econometrics (CORE)
-379, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 89(4), pages 615-41, August.
- Epple, Dennis, 1987. "Hedonic Prices and Implicit Markets: Estimating Demand and Supply Functions for Differentiated Products," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 95(1), pages 59-80, February.
- Mathias Dewatripont & Ian Jewitt & Jean Tirole, 1999.
"The economics of career concerns: part 1 :comparing information structures,"
ULB Institutional Repository
2013/9617, ULB -- Universite Libre de Bruxelles.
- Dewatripont, Mathias & Jewitt, Ian & Tirole, Jean, 1999. "The Economics of Career Concerns, Part I: Comparing Information Structures," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 66(1), pages 183-98, January.
- Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 74, pages 132.
- Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
- Preyra, Colin & Pink, George, 2001. "Balancing incentives in the compensation contracts of nonprofit hospital CEOs," Journal of Health Economics, Elsevier, Elsevier, vol. 20(4), pages 509-525, July.
- William J. Baumol, 1967. "Calculation of Optimal Product and Retailer Characteristics: The Abstract Product Approach," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 75, pages 674.
- repec:cup:jechis:v:44:y:1984:i:04:p:1069-1083_03 is not listed on IDEAS
- Alchian, Armen A & Demsetz, Harold, 1972.
"Production , Information Costs, and Economic Organization,"
American Economic Review, American Economic Association,
American Economic Association, vol. 62(5), pages 777-95, December.
- Armen A. Alchian & Harold Demsetz, 1971. "Production, Information Costs and Economic Organizations," UCLA Economics Working Papers, UCLA Department of Economics 10A, UCLA Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Atsuko SUZUKI).
If references are entirely missing, you can add them using this form.