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Too Few Cooks Spoil the Broth: Division of Labor and Directed Production

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  • Ratto Marisa

    (Université Paris-Dauphine, SDFi)

  • Schnedler Wendelin

    (University of Heidelberg)

Abstract

How can a manager influence workers' activity, while knowing little about it? This paper examines a situation where production requires several tasks, and the manager wants to direct production to achieve a preferred allocation of effort across tasks. However, the effort that is required for each task cannot be observed, and the production result is the only indicator of worker activity. This paper illustrates that in this situation, the manager cannot implement the preferred allocation with a single worker. On the other hand, the manager is able to implement the preferred allocation by inducing a game among several workers. Gains to workers from collusion may be eliminated by an ability-dependent, but potentially inefficient, task assignment. These findings provide a new explanation for the division of labor, and bureaucratic features such as ``over"-specialization and ``wrong" task allocation.

Suggested Citation

  • Ratto Marisa & Schnedler Wendelin, 2008. "Too Few Cooks Spoil the Broth: Division of Labor and Directed Production," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 8(1), pages 1-19, August.
    • Handle: RePEc:bpj:bejeap:v:8:y:2008:i:1:n:27
    DOI: 10.2202/1935-1682.1913
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    2. Christian Espinosa & Juan Gorigoitía & Carlos Maquieira, 2012. "Nonlinear behaviour of EMBI index:the case of eastern European countries," Working Papers 37, Facultad de Economía y Empresa, Universidad Diego Portales.
    3. Grout, Paul & Schnedler, Wendelin, 2008. "Non-Profit Organizations in a Bureaucratic Environment," Sonderforschungsbereich 504 Publications 08-17, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
    4. Balmaceda, Felipe, 2018. "Optimal task assignments with loss-averse agents," European Economic Review, Elsevier, vol. 105(C), pages 1-26.
    5. Balmaceda, Felipe, 2016. "Optimal task assignments," Games and Economic Behavior, Elsevier, vol. 98(C), pages 1-18.
    6. Chen, Bo, 2012. "All-or-nothing payments," Journal of Mathematical Economics, Elsevier, vol. 48(3), pages 133-142.
    7. Kragl, Jenny & Schöttner, Anja, 2011. "Wage floors and optimal job design," Bonn Econ Discussion Papers 01/2011, University of Bonn, Bonn Graduate School of Economics (BGSE).
    8. Jenny Kragl & Anja Schöttner, 2014. "Wage Floors, Imperfect Performance Measures, And Optimal Job Design," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(2), pages 525-550, May.
    9. Jenny Kragl & Anja Schöttner, 2014. "Wage Floors, Imperfect Performance Measures, And Optimal Job Design," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55, pages 525-550, May.
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