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Biased managers, organizational design, and incentive provision
Journal article   Peer reviewed

Biased managers, organizational design, and incentive provision

Cristiano M. Costa, Daniel Ferreira and Humberto Moreira
Economics Letters, Vol.86(3), pp.379-385
2005-03
DOI: https://doi.org/10.1016/j.econlet.2004.10.001

Abstract

Common agency Incentive provision Organizational design Economics
We model the tradeoff between the balance and the strength of incentives implicit in the choice between hierarchical and matrix organizational structures. We show that managerial biases determine which structure is optimal: hierarchical forms are preferred when biases are low, while matrix structures are preferred when biases are high.

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