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Biased managers, organizational design, and incentive provision

  • Moreira, Humberto Ataíde
  • Costa, Cristiano Machado
  • Ferreira, Daniel Bernardo Soares

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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Paper provided by FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil) in its series Economics Working Papers (Ensaios Economicos da EPGE) with number 525.

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Date of creation: 01 Feb 2004
Date of revision:
Handle: RePEc:fgv:epgewp:525
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  1. Holmstrom, Bengt & Milgrom, Paul, 1987. "Aggregation and Linearity in the Provision of Intertemporal Incentives," Econometrica, Econometric Society, vol. 55(2), pages 303-28, March.
  2. Milton Harris & Artur Raviv, 2002. "Organization Design," Management Science, INFORMS, vol. 48(7), pages 852-865, July.
  3. Martimort, David, 1996. "The multiprincipal nature of government," European Economic Review, Elsevier, vol. 40(3-5), pages 673-685, April.
  4. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
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