Organizational Flexibility and Co-Operative Task Allocation Among Agents

Journal of Institutional and Theoretical Economics, Vol. 161, No. 4, pp. 621-635, December 2005

Posted: 13 Mar 2008

See all articles by Jacques P. Lawarree

Jacques P. Lawarree

University of Washington - Department of Economics

Dongsoo Shin

Santa Clara University - Leavey School of Business

Abstract

We compare rigid and flexible organizations when side-contracting among agents is possible. Within a rigid organization, each agent can produce only one component of the final product, whereas within a flexible organization, the agents can reallocate their tasks during the production period. In our model, the principal can only observe the joint output produced by the agents. Our analysis reveals that within a flexible organization, side transfers are exchanged between the agents in equilibrium, and not only an efficient agent but also an inefficient agent may acquire a rent. Yet, the principal's payoff is higher when the organization is flexible as the agents' rent seeking behavior generates more efficient production technology.

JEL Classification: D82, L23

Suggested Citation

Lawarree, Jacques P. and Shin, Dongsoo, Organizational Flexibility and Co-Operative Task Allocation Among Agents. Journal of Institutional and Theoretical Economics, Vol. 161, No. 4, pp. 621-635, December 2005, Available at SSRN: https://ssrn.com/abstract=1104853

Jacques P. Lawarree

University of Washington - Department of Economics ( email )

Box 353330
Seattle, WA 98195-3330
United States

Dongsoo Shin (Contact Author)

Santa Clara University - Leavey School of Business ( email )

500 El Camino Real
Santa Clara, CA California 95053
United States

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