Optimal Job Design In The Presence Of Implicit Contracts
We characterize the optimal job design in a multitasking environment when the firms rely on implicit incentive contracts (i.e., bonus payments). Two natural forms of job design are compared: (i) individual accountability, where each agent is assigned to a particular job and assumes full responsibility for its outcome; and (ii) team accountability, where a group of agents share responsibility for a job and are jointly accountable for its outcome. The key trade-off is that team accountability mitigates the multitasking problem but may weaken the implicit contracts. The optimal job design follows a cut-off rule: firms with high reputation concerns opt for team accountability, whereas firms with low reputation concerns opt for individual accountability. Team accountability is more likely the more acute the multitasking problem is. However, the cut-off rule need not hold if the firm combines implicit incentives with explicit pay-per-performance contracts. JEL codes:
|Date of creation:||2010|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (351) 21 3801638
Fax: (351) 21 3870933
Web page: http://www.fe.unl.pt
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.:
- Drew Fudenberg & David K. Levine & Eric Maskin, 1994.
"The Folk Theorem with Imperfect Public Information,"
Levine's Working Paper Archive
2058, David K. Levine.
- Fudenberg, Drew & Levine, David I & Maskin, Eric, 1994. "The Folk Theorem with Imperfect Public Information," Econometrica, Econometric Society, vol. 62(5), pages 997-1039, September.
- Fudenberg, D. & Levine, D.K. & Maskin, E., 1989. "The Folk Theorem With Inperfect Public Information," Working papers 523, Massachusetts Institute of Technology (MIT), Department of Economics.
- Drew Fudenberg & David K. Levine & Eric Maskin, 1994. "The Folk Theorem with Imperfect Public Information," Levine's Working Paper Archive 394, David K. Levine.
- Jonathan Levin, 2003.
"Relational Incentive Contracts,"
American Economic Review,
American Economic Association, vol. 93(3), pages 835-857, June.
- Jonathan Levin, 2002. "Multilateral Contracting And The Employment Relationship," The Quarterly Journal of Economics, MIT Press, vol. 117(3), pages 1075-1103, August.
- Ola Kval�y & Trond E. Olsen, 2006.
"Team Incentives in Relational Employment Contracts,"
Journal of Labor Economics,
University of Chicago Press, vol. 24(1), pages 139-170, January.
- Kvaløy, Ola & Olsen, Trond E., 2005. "Team Incentives in Relational Employment Contracts," Discussion Papers 2005/7, Department of Business and Management Science, Norwegian School of Economics.
- B. Douglas Bernheim & Michael D. Whinston, 1990. "Multimarket Contact and Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 1-26, Spring.
- Itoh, Hideshi, 1991. "Incentives to Help in Multi-agent Situations," Econometrica, Econometric Society, vol. 59(3), pages 611-36, May.
- MacLeod, W Bentley & Malcomson, James M, 1989.
"Implicit Contracts, Incentive Compatibility, and Involuntary Unemployment,"
Econometric Society, vol. 57(2), pages 447-80, March.
- W. Bentley MacLeod & James M. Malcomson, 1986. "Implicit Contracts, Incentive Compatibility, and Involuntary Unemployment," Working Papers 585, Queen's University, Department of Economics.
- Ramakrishnan, Ram T S & Thakor, Anjan V, 1991. "Cooperation versus Competition in Agency," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(2), pages 248-83, Fall.
- Dewatripont, Mathias & Jewitt, Ian & Tirole, Jean, 2000. "Multitask agency problems: Focus and task clustering," European Economic Review, Elsevier, vol. 44(4-6), pages 869-877, May.
- Besanko, David & Régibeau, Pierre & Rockett, Katharine, 2000. "A Multi-Task Principal-Agent Approach to Organizational Form," CEPR Discussion Papers 2443, C.E.P.R. Discussion Papers.
- Arijit Mukherjee & Luis Vasconcelos, 2011.
"Optimal job design in the presence of implicit contracts,"
RAND Journal of Economics,
RAND Corporation, vol. 42(1), pages 44-69, 03.
- Vasconcelos, Luis & Mukherjee, Arijit, 2010. "Optimal Job Design In The Presence Of Implicit Contracts," FEUNL Working Paper Series wp551, Universidade Nova de Lisboa, Faculdade de Economia.
- Jules H. van Binsbergen & Michael W. Brandt & Ralph S.J. Koijen, 2006.
"Optimal Decentralized Investment Management,"
NBER Working Papers
12144, National Bureau of Economic Research, Inc.
- Roman Inderst & Marco Ottaviani, 2009. "Misselling through Agents," American Economic Review, American Economic Association, vol. 99(3), pages 883-908, June.
- Prather, Larry J. & Middleton, Karen L., 2002. "Are N+1 heads better than one?: The case of mutual fund managers," Journal of Economic Behavior & Organization, Elsevier, vol. 47(1), pages 103-120, January.
- Massa, Massimo & Reuter, Jonathan & Zitzewitz, Eric, 2010. "When should firms share credit with employees? Evidence from anonymously managed mutual funds," Journal of Financial Economics, Elsevier, vol. 95(3), pages 400-424, March.
- Anja Schöttner, 2008. "Relational Contracts, Multitasking, and Job Design," Journal of Law, Economics and Organization, Oxford University Press, vol. 24(1), pages 138-162, May.
When requesting a correction, please mention this item's handle: RePEc:unl:unlfep:wp551. 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: (Sean Story)
If references are entirely missing, you can add them using this form.