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Biased managers, organizational design, and incentive provision

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  • Costa, Cristiano M.
  • Ferreira, Daniel
  • Moreira, Humberto

Abstract

We model the tradeoff between the balance and the strength of incentives implicit in the choice between hierarchical and matrix organizational structures. We show that managerial biases determine which structure is optimal: hierarchical forms are preferred when biases are low, while matrix structures are preferred when biases are high.
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Suggested Citation

  • Costa, Cristiano M. & Ferreira, Daniel & Moreira, Humberto, 2005. "Biased managers, organizational design, and incentive provision," Economics Letters, Elsevier, vol. 86(3), pages 379-385, March.
    • Handle: RePEc:eee:ecolet:v:86:y:2005:i:3:p:379-385
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    References listed on IDEAS

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    1. Milton Harris & Artur Raviv, 2002. "Organization Design," Management Science, INFORMS, vol. 48(7), pages 852-865, July.
    2. Martimort, David, 1996. "The multiprincipal nature of government," European Economic Review, Elsevier, vol. 40(3-5), pages 673-685, April.
    3. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
    4. Holmstrom, Bengt & Milgrom, Paul, 1987. "Aggregation and Linearity in the Provision of Intertemporal Incentives," Econometrica, Econometric Society, vol. 55(2), pages 303-328, March.
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    2. Flôres Junior, Renato Galvão, 2004. "On the use (fulness) of CGE modelling in trade negotiations and policy," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 564, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    3. Monteiro, Paulo Klinger, 2006. "The set of equilibria of first-price auctions," Journal of Mathematical Economics, Elsevier, vol. 42(3), pages 364-372, June.
    4. Xiao, Zhijie & Lima, Luiz Renato Regis de Oliveira, 2004. "Purchasing power parity and the unit root tests: a robust analysis," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 552, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    5. Cavalcanti Ferreira, Pedro & Facchini, Giovanni, 2005. "Trade liberalization and industrial concentration: Evidence from Brazil," The Quarterly Review of Economics and Finance, Elsevier, vol. 45(2-3), pages 432-446, May.
    6. Carrasco, Vinicius, 2010. "Common agency, organizational design and the hold-up problem," Economics Letters, Elsevier, vol. 108(3), pages 264-268, September.
    7. Monteiro, Paulo Klinger, 2009. "First-price auction symmetric equilibria with a general distribution," Games and Economic Behavior, Elsevier, vol. 65(1), pages 256-269, January.

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