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An Economic Analysis of the Peter and Dilbert Principles

UTS Working Paper No. 101

18 Pages Posted: 7 Sep 2000  

João Ricardo Faria

University of Texas at Dallas - Department of Economics & Finance

Date Written: January 2000

Abstract

The paper discusses how the Peter and Dilbert Principles can occur and what are the consequences for a profit maximizing firm. A competence frontier is constructed as a linear combination of the maximum levels of technical and social skills that are difficult to measure and evaluate. The Peter Principle holds when managers are chosen from workers that are in the competence frontier and the Dilbert Principle when they are below the competence frontier. It is shown that the profitability under the Dilbert Principle is less than under the Peter Principle. The introduction of new technologies is one form to avoid the Dilbert Principle.

JEL Classification: M12, L22

Suggested Citation

Faria, João Ricardo, An Economic Analysis of the Peter and Dilbert Principles (January 2000). UTS Working Paper No. 101. Available at SSRN: https://ssrn.com/abstract=231650 or http://dx.doi.org/10.2139/ssrn.231650

João Ricardo Faria (Contact Author)

University of Texas at Dallas - Department of Economics & Finance ( email )

P.O. Box 830688, GR31
Richardson, TX 75083
United States
972-883-6402 (Phone)
972-883-6297 (Fax)

HOME PAGE: http://www.geocities.com/fariajocka/Index.html

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