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Too Few Cooks Spoil the Broth: Division of Labour and Directed Production

Author

Listed:
  • Marisa Ratto

    () (Université Paris-Dauphine (SDFi))

  • Wendelin Schnedler

    () (University of Heidelberg, Department of Economics)

Abstract

How can a manager influence workers' activity while knowing little about it? This paper examines a situation where production requires several tasks, and the manager wants to direct production to achieve a preferred allocation of effort across tasks. However, the effort that is required for each task cannot be observed, and the production result is the only indicator of worker activity. This paper illustrates that in this situation, the manager cannot implement the preferred allocation with a single worker. On the other hand, the manager is able to implement the preferred allocation by inducing a game among several workers. Gains to workers from collusion may be eliminated by an ability-dependent, but potentially inefficient, task assignment. These findings provide a new explanation for the division of labor, and bureaucratic features such as "over"-specialization and "wrong" task allocation.

Suggested Citation

  • Marisa Ratto & Wendelin Schnedler, 2008. "Too Few Cooks Spoil the Broth: Division of Labour and Directed Production," Working Papers 0468, University of Heidelberg, Department of Economics, revised Jul 2008.
  • Handle: RePEc:awi:wpaper:0468
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    File URL: http://www.uni-heidelberg.de/md/awi/forschung/dp468.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Jenny Kragl & Anja Schöttner, 2014. "Wage Floors, Imperfect Performance Measures, And Optimal Job Design," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55, pages 525-550, May.
    2. Felipe Balmaceda, 2012. "On the Optimality of One-size-fits-all Contracts: The Limited Liability Case," Documentos de Trabajo 291, Centro de Economía Aplicada, Universidad de Chile.
    3. Christian Espinosa & Juan Gorigoitía & Carlos Maquieira, 2012. "Nonlinear behaviour of EMBI index:the case of eastern European countries," Working Papers 37, Facultad de Economía y Empresa, Universidad Diego Portales.
    4. Balmaceda, Felipe, 2016. "Optimal task assignments," Games and Economic Behavior, Elsevier, vol. 98(C), pages 1-18.
    5. Paul A. Grout & Wendelin Schnedler, 2008. "Non-Profit Organizations in a Bureaucratic Environment," The Centre for Market and Public Organisation 08/202, Department of Economics, University of Bristol, UK.
    6. Ratto Marisa & Schnedler Wendelin, 2008. "Too Few Cooks Spoil the Broth: Division of Labor and Directed Production," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 8(1), pages 1-19, August.

    More about this item

    Keywords

    specialization; job design; moral hazard; multitasking;

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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