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Licensed Unlicensed Requires Authentication Published by De Gruyter September 15, 2007

Collective Punishments: Incentives and Examinations in Organisations

Priyodorshi Banerjee

The paper investigates the impact of examinations on incentives and decision-making in bureaucracies and similar organisations. When one amongst a group of bureaucrats can be appointed to give policy advice whose outcome affects all parties, with advisory ability increasing in personal effort, a free-riding problem is generated if preferences are aligned, leading to an ex ante inefficiency. Free-riding may be mitigated by an examination with a pass-mark, i.e., a minimum ability requirement as a necessary criterion for advisory appointment. By collectively punishing all experts when maximal ability is low, it raises private incentive to enhance ability, and improves decision quality.

Published Online: 2007-9-15

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