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Observability and incentive in organizations

Author

Listed:
  • Li, Sanxi
  • Ye, Bing
  • Yu, Jianyu

Abstract

The paper shows that producer-owned firms are more efficient in quality provision than investor-owned firms if input quality is observable, while they are less efficient when the input quality is unobservable and the size of the organization is large.

Suggested Citation

  • Li, Sanxi & Ye, Bing & Yu, Jianyu, 2012. "Observability and incentive in organizations," Economics Letters, Elsevier, vol. 114(2), pages 205-207.
    • Handle: RePEc:eee:ecolet:v:114:y:2012:i:2:p:205-207
    DOI: 10.1016/j.econlet.2011.09.025
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    References listed on IDEAS

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    1. Hart, Oliver & Moore, John, 1996. "The Governance of Exchanges: Members' Cooperatives versus Outside Ownership," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 12(4), pages 53-69, Winter.
    2. Bengt Holmstrom, 1982. "Moral Hazard in Teams," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 324-340, Autumn.
    3. Sexton, Richard J. & Lavoie, Nathalie, 2001. "Food processing and distribution: An industrial organization approach," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 15, pages 863-932, Elsevier.
    4. Sanxi Li & Bing Ye & Jianyu Yu, 2011. "Quality Testing and Incentives in Organizations. Cooperative vs Investor-Owned Firm," Revue économique, Presses de Sciences-Po, vol. 62(3), pages 599-608.
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    Cited by:

    1. Goldlücke, Susanne & Kranz, Sebastian, 2012. "Delegation, monitoring, and relational contracts," Economics Letters, Elsevier, vol. 117(2), pages 405-407.

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    More about this item

    Keywords

    Producer-owned firm; Investor-owned firm; Moral hazard in team; Observability;
    All these keywords.

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • L3 - Industrial Organization - - Nonprofit Organizations and Public Enterprise

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