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Hedonic prices and multitask incentives

  • Masaki Nakabayashi

    ()

    (Graduate School of Economics, Osaka University)

Human tasks are often multidimensional. Holmstrom and Milgrom (1991) concluded that ghigh-poweredh incentives cannot work unless all dimensions of these tasks are observable in the firm. However, as this study shows, if the firm can observe the price vector of its products in the market, distinguish each dimension of the price vector, and connect the information with signals from workers in the firm, then the use of multitask ghigh-poweredh incentives becomes feasible. Product differentiation with committed quality satisfies those conditions, which has been practiced by Japanese, but not by Western, manufacturing for a century.

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Paper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 05-32-Rev..

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Length: 31 pages
Date of creation: Dec 2005
Date of revision: Mar 2006
Handle: RePEc:osk:wpaper:0532r
Contact details of provider: Web page: http://www.econ.osaka-u.ac.jp/
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  1. William J. Baumol, 1967. "Calculation of Optimal Product and Retailer Characteristics: The Abstract Product Approach," Journal of Political Economy, University of Chicago Press, vol. 75, pages 674.
  2. Epple, Dennis, 1987. "Hedonic Prices and Implicit Markets: Estimating Demand and Supply Functions for Differentiated Products," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 59-80, February.
  3. Clark, Gregory, 1984. "Authority and Efficiency: The Labor Market and the Managerial Revolution of the Late Nineteenth Century," The Journal of Economic History, Cambridge University Press, vol. 44(04), pages 1069-1083, December.
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  8. Slade, Margaret E, 1996. "Multitask Agency and Contract Choice: An Empirical Exploration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(2), pages 465-86, May.
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  11. Preyra, Colin & Pink, George, 2001. "Balancing incentives in the compensation contracts of nonprofit hospital CEOs," Journal of Health Economics, Elsevier, vol. 20(4), pages 509-525, July.
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