Abstract
This paper establishes the possibility of achieving both efficiency and incentive compatibility within a hierarchical organization, even when managers are effortaverse, as long as efficiency is defined as incorporating managers' effort disutilities as opportunity costs of production. It is further argued that this approach yields the same (i.e., Pareto) type of efficiency as achieved by the perfectly competitive price system when managerial disutility of effort is allowed. Thus, the negative results published by Miller and Murrell hold because of the non-Paretian objective functions assumed for central planners.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
