Collective Punishments: Incentives and Examinations in Organisations

Banerjee Priyodorshi
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Banerjee Priyodorshi: Indian Statistical Institute, banpriyo@gmail.com

The B.E. Journal of Theoretical Economics, 2007, vol. 7, issue 1, 36

Abstract: The paper investigates the impact of examinations on incentives and decision-making in bureaucracies and similar organisations. When one amongst a group of bureaucrats can be appointed to give policy advice whose outcome affects all parties, with advisory ability increasing in personal effort, a free-riding problem is generated if preferences are aligned, leading to an ex ante inefficiency. Free-riding may be mitigated by an examination with a pass-mark, i.e., a minimum ability requirement as a necessary criterion for advisory appointment. By collectively punishing all experts when maximal ability is low, it raises private incentive to enhance ability, and improves decision quality.

Keywords: collective punishments; examinations; incentives in organisations (search for similar items in EconPapers)
Date: 2007
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DOI: 10.2202/1935-1704.1388

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