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Discretion and Incentives in Organizations

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  • Olsen, Trond E
  • Torsvik, Gaute

Abstract

We analyze the link between workers' discretion and incentives in an organisation that lasts for several periods. In a long-lasting affiliation, it is possible for the principal to learn and update her beliefs about essential characteristics associated with either the job or the agent. This learning possibility has an important effect on the link between workers' discretion and incentives. Copyright 2000 by University of Chicago Press.

Suggested Citation

  • Olsen, Trond E & Torsvik, Gaute, 2000. "Discretion and Incentives in Organizations," Journal of Labor Economics, University of Chicago Press, vol. 18(3), pages 377-404, July.
    • Handle: RePEc:ucp:jlabec:v:18:y:2000:i:3:p:377-404
    DOI: 10.1086/209963
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    References listed on IDEAS

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    1. Meyer, Margaret A & Vickers, John, 1997. "Performance Comparisons and Dynamic Incentives," Journal of Political Economy, University of Chicago Press, vol. 105(3), pages 547-581, June.
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    5. Holmstrom, Bengt & Milgrom, Paul, 1987. "Aggregation and Linearity in the Provision of Intertemporal Incentives," Econometrica, Econometric Society, vol. 55(2), pages 303-328, March.
    6. Olsen, Trond E. & Torsvik, Gaute, 1995. "Intertemporal common agency and organizational design: How much decentralization?," European Economic Review, Elsevier, vol. 39(7), pages 1405-1428, August.
    7. Mathias Dewatripont, 1989. "Renegotiation and Information Revelation Over Time: The Case of Optimal Labor Contracts," The Quarterly Journal of Economics, Oxford University Press, vol. 104(3), pages 589-619.
    8. Rey, Patrick & Salanie, Bernard, 1990. "Long-term, Short-term and Renegotiation: On the Value of Commitment in Contracting," Econometrica, Econometric Society, vol. 58(3), pages 597-619, May.
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    Cited by:

    1. Bloom, Nicholas & Van Reenen, John, 2011. "Human Resource Management and Productivity," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 19, pages 1697-1767, Elsevier.
    2. Pablo Casas-Arce & Santhi Hejeebu & Cornell College, 2004. "Job Design and the Benefits of Private Trade," Economics Series Working Papers 204, University of Oxford, Department of Economics.
    3. repec:hum:wpaper:sfb649dp2005-052 is not listed on IDEAS
    4. Josef Falkinger & Michel Habib, 2017. "Principle or Opportunism? Discretion, Capital, and Incentives," Swiss Finance Institute Research Paper Series 17-73, Swiss Finance Institute.
    5. Dongsoo Shin & Roland Strausz, 2014. "Delegation and dynamic incentives," RAND Journal of Economics, RAND Corporation, vol. 45(3), pages 495-520, September.
    6. Gorkem Celik & Dongsoo Shin & Roland Strausz, 2023. "Aggregate Information and Organizational Structures," Journal of Industrial Economics, Wiley Blackwell, vol. 71(1), pages 256-290, March.
    7. Li, Jin & Mukherjee, Arijit & Vasconcelos, Luis, 2019. "Rulebooks in Relational Contracts," Working Papers 2019-7, Michigan State University, Department of Economics.
    8. Hvide, Hans K. & Kaplan, Todd, 2003. "Delegated Job Design," CEPR Discussion Papers 3907, C.E.P.R. Discussion Papers.
    9. Hans K. Hvide & Tore Leite, 2003. "A Theory of Capital Structure with Strategic Defaults and Priority Violations," Finance 0311003, University Library of Munich, Germany.
    10. Luis Garicano & Thomas N. Hubbard, 2003. "Specialization, Firms, and Markets: The Division of Labor Within and Between Law Firms," NBER Working Papers 9719, National Bureau of Economic Research, Inc.
    11. Pablo Casas‐Arce & Santhi Hejeebu, 2012. "Job Design in the Presence of Career Concerns," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 21(4), pages 1083-1109, December.
    12. Josef Falkinger & Michel A. Habib, 2021. "Managerial discretion and shareholder capital at risk," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 48(7-8), pages 1215-1245, July.
    13. Schöttner, Anja, 2005. "Relational contracts and job design," SFB 649 Discussion Papers 2005-052, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    14. Michael D. Frakes & Melissa F. Wasserman, 2024. "Deadlines Versus Continuous Incentives: Evidence from the Patent Office," NBER Working Papers 32066, National Bureau of Economic Research, Inc.

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