Biased Managers, Organizational Design, and Incentive Provision

Posted: 9 Jan 2005

See all articles by Cristiano M. Costa

Cristiano M. Costa

University of Vale do Rio dos Sinos (UNISINOS)

Daniel Ferreira

London School of Economics - Department of Finance; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Humberto Moreira

Fundacao Getulio Vargas (FGV)

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Abstract

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.

Keywords: Organizational Design, Incentive Provision, Common Agency

JEL Classification: L2, D82, M11

Suggested Citation

Costa, Cristiano M. and Ferreira, Daniel and Moreira, Humberto, Biased Managers, Organizational Design, and Incentive Provision. Economics Letters, Vol. 86, No. 3, 379-385, March 2005, Available at SSRN: https://ssrn.com/abstract=645023

Cristiano M. Costa

University of Vale do Rio dos Sinos (UNISINOS) ( email )

Av. Unisinos, 950
Cristo Rei
São Leopoldo, RS 93022-000
Brazil
+55 51 35911122 (Phone)

HOME PAGE: http://www.unisinos.br

Daniel Ferreira (Contact Author)

London School of Economics - Department of Finance ( email )

Houghton Street
London, WC2A 2AE
United Kingdom
(+44) 20 7955 7544 (Phone)

HOME PAGE: http://personal.lse.ac.uk/FERREIRD/

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Humberto Moreira

Fundacao Getulio Vargas (FGV) ( email )

R. Dr. Neto de Araujo 320 cj 1307
Rio de Janeiro, Rio de Janeiro 22250-900
Brazil

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