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Too much monitoring, not enough performance pay

de Meza, David and Southey, C. (1999) Too much monitoring, not enough performance pay. Economic Journal, 109 (454). pp. 126-139. ISSN 0013-0133

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Abstract

This paper endogenises the internal organisation of competitive firms in a simple general equilibrium framework. The options are monitored teams, unmonitored teams motivated by collective performance pay, and self-employment. The choice of incentive scheme depends on market price and also affects price through its influence on output. As more people opt for self employment, pecuniary externalities increase the pressure on the rest to follow suit and Pareto rankable multiple equilibria arise. The conditions for a competitive equilibrium to be constrained efficient are restrictive and everyone may gain from policies limiting monitoring and self employment and from the imposition of entry taxes.

Item Type: Article
Official URL: http://www.blackwellpublishing.com/journal.asp?ref...
Additional Information: © 1999 The Royal Economic Society
Library of Congress subject classification: H Social Sciences > HB Economic Theory
Sets: Research centres and groups > Managerial Economics and Strategy Group
Departments > Management
Collections > Economists Online
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 09 May 2011 13:23
URL: http://eprints.lse.ac.uk/35875/

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