Hidden Action, Identification, and Organization Design

Wendelin Schnedler

No 5325, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Incentives often fail in inducing economic agents to engage in a desirable activity; implementability is restricted. What restricts implementability? When does re-organization help to overcome this restriction? This paper shows that any restriction of implementability is caused by an identification problem. It also describes organizations that can solve this identification problem and provides conditions under which such organisations exist. Applying the findings to established and new moral hazard models yields insights into optimal organization design, uncovers the reason why certain organization designs, such as advocacy or specialization, overcome restricted implementability, and formalizes a wide-spread type of multi-tasking problem.

Keywords: identification by organization design; multi-tasking; implementation; hidden action; moral hazard (search for similar items in EconPapers)
JEL-codes: D82 D86 J33 M41 M52 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2010-11
New Economics Papers: this item is included in nep-bec and nep-cta
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Hidden Action, Identification, and Organization Design (2010)
Working Paper: Hidden action, identification and organisation design (2010)
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