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Hedonic prices and multitask incentives

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  • Masaki Nakabayashi

    (Graduate School of Economics, Osaka University)

Abstract

Many human tasks are multidimensional. Hence Holmstrom and Milgrom (1991) concluded that a ghigh-powered h incentive cannot work unless all dimensions of the task are observable in the firm. However, as this study shows, if the firm can observe the price vector of its product in the market, distinguish each dimension of the price vector, and connect the information with signals from workers in the firm, then the multitask ghighpowered h incentive becomes manageable. Product differentiation with committed quality satisfies this condition, which has been practiced by Japanese, but not by Western, manufacturing for a century.

Suggested Citation

  • Masaki Nakabayashi, 2005. "Hedonic prices and multitask incentives," Discussion Papers in Economics and Business 05-32, Osaka University, Graduate School of Economics.
    • Handle: RePEc:osk:wpaper:0532
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    References listed on IDEAS

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    More about this item

    Keywords

    multitask incentive; high-powered incentive; hedonic price; contract theory; Japanese manufacturing.;
    All these keywords.

    JEL classification:

    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • N65 - Economic History - - Manufacturing and Construction - - - Asia including Middle East

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