Experience Benefits and Firm Organization
A principal requires a manager for production. He can use an internal manager, or contracts with an external manger. In each case, the manager obtains experience benefits from production. When the principal uses an internal manager, both parties share cost information. When the principal contracts with an external manager, only the external manager acquires cost information. The internal manager has limited access to the credit market; he has a minimum income constraint. The external manager has adequate access and has no minimum income constraint. The principal faces a tradeoff. Hiring an internal manager eliminates asymmetric information, but extracting experience rent is more difficult due to the minimum income constraint. Hiring an external manager means giving up information rent, but extracting experience rent is feasible. Whether the principal uses an internal or an external manager depends on the tightness of the minimum income constraint and the magnitude of the experience benefit. The principal's optimal choice may not be socially efficient.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.bu.edu/econ/
More information through EDIRC
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.:
- Ingela Alger & Régis Renault, 2007.
"Screening Ethics when Honest Agents Keep their Word,"
Springer, vol. 30(2), pages 291-311, February.
- Ingela Alger & Regis Renault, 2003. "Screening Ethics when Honest Agents Keep their Word," Boston College Working Papers in Economics 562, Boston College Department of Economics, revised 09 Nov 2004.
- Anke S. Kessler & Christoph Lülfesmann, 2002.
"The Theory of Human Capital Revisited: On the Interaction of General and Specific Investments,"
CESifo Working Paper Series
776, CESifo Group Munich.
- Anke S. Kessler & Christoph Lülfesmann, 2006. "The Theory of Human Capital Revisited: on the Interaction of General and Specific Investments," Economic Journal, Royal Economic Society, vol. 116(514), pages 903-923, October.
- Christoph Luelfesmann, 2000. "The Theory of Human Capital Revisited: On the Interaction of General and Specific Investments," Econometric Society World Congress 2000 Contributed Papers 0659, Econometric Society.
- Kessler, Anke & Lülfesmann, Christoph, 2000. "The Theory of Human Capital Revisited: On the Interaction of General and Specific Investments," CEPR Discussion Papers 2533, C.E.P.R. Discussion Papers.
- Gonzalez-Diaz, Manuel & Arrunada, Benito & Fernandez, Alberto, 2000.
"Causes of subcontracting: evidence from panel data on construction firms,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 42(2), pages 167-187, June.
- Manuel González & Benito Arruñada & Alberto Fernández, 1999. "Causes of subcontracting: Evidence from panel data on construction firms," Economics Working Papers 428, Department of Economics and Business, Universitat Pompeu Fabra.
- Rosen, Sherwin, 1972. "Learning by Experience as Joint Production," The Quarterly Journal of Economics, MIT Press, vol. 86(3), pages 366-82, August.
- Jacques Crémer & Luis Garicano & Andrea Prat, 2007.
"Language and the Theory of the Firm,"
The Quarterly Journal of Economics,
MIT Press, vol. 122(1), pages 373-407, 02.
- Masten, Scott E, 1988. "A Legal Basis for the Firm," Journal of Law, Economics and Organization, Oxford University Press, vol. 4(1), pages 181-98, Spring.
- Masten, Scott E. & Meehan, James Jr. & Snyder, Edward A., 1989. "Vertical integration in the U.S. auto industry : A note on the influence of transaction specific assets," Journal of Economic Behavior & Organization, Elsevier, vol. 12(2), pages 265-273, October.
- Holmstrom, Bengt, 1999.
"Managerial Incentive Problems: A Dynamic Perspective,"
Review of Economic Studies,
Wiley Blackwell, vol. 66(1), pages 169-82, January.
- Bengt Holmstrom, 1999. "Managerial Incentive Problems: A Dynamic Perspective," NBER Working Papers 6875, National Bureau of Economic Research, Inc.
- Joan Ramon Rosés, 2005.
"Subcontracting and vertical integration in the Spanish cotton industry,"
Economics Working Papers
816, Department of Economics and Business, Universitat Pompeu Fabra.
- Joan R. Roses, 2005. "Subcontracting and Vertical Integration in the Spanish Cotton Industry," Working Papers in Economic History wh051302, Universidad Carlos III, Instituto Figuerola de Historia y Ciencias Sociales.
- Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," Journal of Political Economy, University of Chicago Press, vol. 70, pages 9.
- Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, vol. 75, pages 352.
- Hubbard, Thomas N, 2001. "Contractual Form and Market Thickness in Trucking," RAND Journal of Economics, The RAND Corporation, vol. 32(2), pages 369-86, Summer.
When requesting a correction, please mention this item's handle: RePEc:bos:wpaper:wp2009-007. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gillian Gurish)
If references are entirely missing, you can add them using this form.