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Motivating for new changes when agents have reputation concerns

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  • Kim, Doyoung

Abstract

Inertia, a tendency to resist initiating and adopting new changes, is a primary issue in established organizations. This paper explores how a principal can optimally address this issue when an agent has reputation concerns. It shows that the principal can motivate the agent to initiate a new change by damaging the agent's reputation when he just sits on the status quo. In doing so, compared to the benchmark case where inertia is not an issue, the principal extends monitoring that assesses the value of the new change, and reduces intervention in the agent's implementation of it. Thus the paper suggests that active monitoring and passive intervention can motivate the agent to initiate a new change.

Suggested Citation

  • Kim, Doyoung, 2017. "Motivating for new changes when agents have reputation concerns," Journal of Economic Behavior & Organization, Elsevier, vol. 137(C), pages 37-53.
    • Handle: RePEc:eee:jeborg:v:137:y:2017:i:c:p:37-53
    DOI: 10.1016/j.jebo.2017.02.015
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    Cited by:

    1. Yasunari Tamada, 2019. "Disclosure of Contract Clauses and Career Concerns," Economics Bulletin, AccessEcon, vol. 39(3), pages 1968-1978.

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    More about this item

    Keywords

    Inertia; Reputation concerns; Monitoring; Intervention;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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