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dc.contributor.authorBerkovitch, Elazaren_US
dc.contributor.authorIsrael, Ronenen_US
dc.contributor.authorSpiegel, Yossien_US
dc.description.abstractWe develop a theory of organization design in which the firm's structure is chosen to mitigate moral hazard problems in the selection and the implementation of projects. For a given set of projects, the 'divisional structure' which gives each agent the full responsibility over a subset of projects is in general more efficient than the functional structure under which projects are implemented by teams of agents, each of whom specializes in one task. However, the ex post efficiency of the divisional structure may encourage the firm's manager to select more expensive (but still profitable) projects ex ante. We examine how the tradeoff between the ex post inefficiency in the implementation of projects and the ex ante inefficiency in the selection of projects is affected by various factors like size, complexity, and asymmetry in the importance of tasks. We also explore the desirability of adopting a narrow business strategy and the implications of managerial work overload for organizational structure.en_US
dc.publisher|aCenter for the Study of Industrial Organization at Northwestern Univ. |cEvanston, Ill.en_US
dc.relation.ispartofseries|aCSIO working paper |x0094en_US
dc.subject.keywordDivisional structureen_US
dc.subject.keywordfunctional structureen_US
dc.subject.keywordproject selectionen_US
dc.subject.keywordmoral hazarden_US
dc.subject.keywordmoral hazard in teamsen_US
dc.subject.keywordnarrow business strategyen_US
dc.titleA double moral hazard model of organization designen_US
dc.type|aWorking Paperen_US

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