Hedonic prices and multitask incentives

Masaki Nakabayashi

No 05-32, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: Many human tasks are multidimensional. Hence Holmstrom and Milgrom (1991) concluded that a ghigh-powered h incentive cannot work unless all dimensions of the task are observable in the firm. However, as this study shows, if the firm can observe the price vector of its product in the market, distinguish each dimension of the price vector, and connect the information with signals from workers in the firm, then the multitask ghighpowered h incentive becomes manageable. Product differentiation with committed quality satisfies this condition, which has been practiced by Japanese, but not by Western, manufacturing for a century.

Keywords: multitask incentive; high-powered incentive; hedonic price; contract theory; Japanese manufacturing. (search for similar items in EconPapers)
JEL-codes: D23 L22 N65 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2005-12
New Economics Papers: this item is included in nep-ind
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Working Paper: Hedonic prices and multitask incentives (2006)
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