Review Presentation about Incentive, Organization, and Organization Form by Maskin et al

Feb 3rd, 2012
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How does organization make difference in economics performance? By focusing on the relations between information and incentive, Maskin et al compare the M-form (multi-divisional) and U-form (unitary) management style.

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IntroductionTheoretical AnalysisEvidenceCritiques and Extended ThoughtsIntroductionHow does organization make difference to economicperformance?By focusing on the relation between information andincentives of managers, Maskin et al compare theM-form(multi-divisional) and the U-form (unitary).Their theoretical analysis suggests that the M-form confersbetter incentives to mid-level managers competing eachother in a yard stick competition, if there is less noiseassociated with the performance of managers under theM-form than the U-form.Maskin E., Xu C. and Qian Y.IntroductionTheoretical AnalysisEvidenceCritiques and Extended ThoughtsU-form and M-formMaskin E., Xu C. and Qian Y.IntroductionTheoretical AnalysisEvidenceCritiques and Extended ThoughtsModelBasic SettingsOutput of a plant in industry i and region r :xir = ei + er + e + i + r + Shocks: is the shock to entire economy, is the industrialshock, is the regional shock. 1) increase the variance ofoutput of those plants. 2) potentially decrease the mean oftheir output.Managers reward t() depends on the observable outputs:i r xir jM tj ()Each manager chooses and effort level that maximizes hisown net expected u: E[U(t()) C(e)]Maskin E., Xu C. and Qian Y.IntroductionTheoretical AnalysisEvidenceCritiques and Extended ThoughtsModelTheoretical Implications1. The information available on which to base incentives isthe same across or

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