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Optimal job design in the presence of implicit contracts

Mukherjee, A and Vasconcelos, L (2011) 'Optimal job design in the presence of implicit contracts.' RAND Journal of Economics, 42 (1). 44 - 69. ISSN 0741-6261

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We characterize the optimal job design in a multitasking environment when the firms use implicit contracts (i.e., bonus payments). Two natural forms of job design are compared: (i) individual assignment, where each agent is assigned to a particular job and (ii) team assignment, where a group of agents share responsibility for a job and are jointly accountable for its outcome. Team assignment mitigates the multitasking problem but may weaken the implicit contracts. The optimal job design follows a cutoff rule where only the firms with high reputation concerns opt for team assignment. However, the cutoff rule need not hold if the firm can combine implicit incentives with explicit pay-per-performance contracts. Copyright © 2011, RAND.

Item Type: Article
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Jim Jamieson
Date Deposited: 13 Jul 2012 10:28
Last Modified: 30 Jan 2019 16:17

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