Information Flow, Incentives, and the Optimal Assignment of Responsibilities

Posted: 20 Nov 1997

See all articles by Thomas Hemmer

Thomas Hemmer

Rice University - Jesse H. Jones Graduate School of Business

Abstract

In this paper, I study how to best assign responsibilities and design reward structures to take advantage of available information for a two-stage production process. Two alternative assignments compete. One resembles the American style push assignment where the responsibility for initiating production rests with initial stage agent, while the other assignment is similar to the Japanese style pull where initiating production is the responsibility of the final stage agent. I show that the key distinguishing feature between these assignments is the output under the pull allows for inference about quality enhancing activities where output under the push assignment does not. The ability to take advantage of such information to provide incentives for quality enhancement in turn dictates the choice between these two assignments. Based on this, I provide insights into the choice of an optimal assignment and the implications of the choice for product quality, productivity, and process improvement.

JEL Classification: M40, M46, L23

Suggested Citation

Hemmer, Thomas, Information Flow, Incentives, and the Optimal Assignment of Responsibilities. Available at SSRN: https://ssrn.com/abstract=42130

Thomas Hemmer (Contact Author)

Rice University - Jesse H. Jones Graduate School of Business ( email )

6100 South Main Street
P.O. Box 1892
Houston, TX 77005-1892
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
1,652
PlumX Metrics