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Hedonic prices and multidimensional incentives

Author

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  • Masaki Nakabayashi

    (Graduate School of Economics, Osaka University)

Abstract

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 multidimensional ghigh-powered h incentives becomes feasible. Product differentiation with committed quality satisfies those conditions, which has been practiced by the Japanese, but not by the Western, manufacturing for a century.

Suggested Citation

  • Masaki Nakabayashi, 2005. "Hedonic prices and multidimensional incentives," Discussion Papers in Economics and Business 05-32-Rev.2, Osaka University, Graduate School of Economics, revised May 2006.
    • Handle: RePEc:osk:wpaper:0532r2
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    multidimensional incentives; multitask incentives; high-powered incentives; hedonic prices; Japanese manufacturing.;
    All these keywords.

    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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