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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-powered h 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-powered h 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.

Suggested Citation

  • Masaki Nakabayashi, 2005. "Hedonic prices and multitask incentives," Discussion Papers in Economics and Business 05-32-Rev., Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP), revised Mar 2006.
  • Handle: RePEc:osk:wpaper:0532r

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    References listed on IDEAS

    1. Itoh, Hideshi, 1992. "Cooperation in Hierarchical Organizations: An Incentive Perspective," Journal of Law, Economics, and Organization, Oxford University Press, vol. 8(2), pages 321-345, April.
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    More about this item


    multitask incentives; high-powered incentives; hedonic prices; contract theory; Japanese manufacturing.;

    JEL classification:

    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • N65 - Economic History - - Manufacturing and Construction - - - Asia including Middle East


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