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Bend Them but Don't Break Them: Passionate Workers, Skeptical Managers, and Decision Making in Organizations

Omar A. Nayeem

American Economic Journal: Microeconomics, 2017, vol. 9, issue 3, 100-125

Abstract: This paper explores the useful but delicate role of managerial skepticism in hierarchical knowledge-based organizations. In these settings, the decision-maker principal seeks advice from managers, who instruct expert frontline workers to acquire information. Given unverifiable information quality and private-valued agents, moral hazard and adverse selection arise with workers and managers, respectively. Pairing extremely passionate workers with moderately skeptical managers alleviates both problems; however, the degree of managerial skepticism must be finely tuned: too little skepticism fails to improve workers' incentives, while too much skepticism destroys workers' incentives altogether. Case studies from the high-tech industry support these insights.

JEL-codes: D23 D82 M12 M51 (search for similar items in EconPapers)
Date: 2017
Note: DOI: 10.1257/mic.20150199
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