Incentive Design and Manager Performances: an ABM Approach

Concetta Sorropago

No 8, Working papers from Department of Economics, Social Studies, Applied Mathematics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino

Abstract: We present a simplified model to provide a virtual laboratory to test the effects of the use of different performance evaluation measures to design manager's incentives in a project-based professional service organization. Our company's owner has to cope with the scheduling of multiple resource constraint projects in real time (RCMPSP), and with the design of the production manager incentive, whose variable wage is tied to some measures of the performance, which are proxies of the original owner's goal. We propose an agent based model approach where the agents' intelligence lies in the choice of the scheduling sequences. A discrete event simulator (DES) executes the projects, allocating in real time, the limited resources available. A Genetic Algorithm, evolving the sequence, randomly generated, uses the DES to simulate the effect and ranks the solutions. In this way, we investigate the incentive alignment problem as a resource allocation problem, comparing the results deriving from their respective "good solutions".

Keywords: Complex System Dynamics; Resource constrained multi project scheduling; Incentive Design; Performance Evaluation Measures; Genetic Algorithm (search for similar items in EconPapers)
JEL-codes: C63 D23 L2 M12 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2012-05
New Economics Papers: this item is included in nep-cmp, nep-hrm and nep-ppm
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http://www.bemservizi.unito.it/repec/tur/wpapnw/m8.pdf First version, 2012 (application/pdf)

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