The Optimal Structure of Incentives and Authority Within an Organization.
Volume: Volume 7, No. 1
Issue: Spring 1976
Pages: pp. 105-131
Authors: James A. Mirrlees
Title: The Optimal Structure of Incentives and Authority Within an Organization.
Abstract: Two kinds of models for a productive organization are presented. In the first, both production and rewards are based on the performance of individuals, which is perfectly observed. Their abilities are not observable. Despite this, theorems are proved giving strong grounds for the equality of wages and marginal products unless there is monopsony in the labor market. This latter case is also discussed. The second model, which focuses on the imperfect observation of performance, allows interesting deductions about optimal payment schedules and organizational structure.
JEL Classification
Microeconomics Theory of Production (0223)
Organization and Decision Theory