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The B.E. Journal of Theoretical Economics

Editor-in-Chief: Schipper, Burkhard

Ed. by Fong, Yuk-fai / Peeters, Ronald / Puzzello , Daniela / Rivas, Javier / Wenzelburger, Jan

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Collective Punishments: Incentives and Examinations in Organisations

Priyodorshi Banerjee
  • 1Indian Statistical Institute,
Published Online: 2007-09-15 | DOI: https://doi.org/10.2202/1935-1704.1388

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.

Keywords: collective punishments; examinations; incentives in organisations

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Published Online: 2007-09-15

Citation Information: The B.E. Journal of Theoretical Economics, ISSN (Online) 1935-1704, DOI: https://doi.org/10.2202/1935-1704.1388. Export Citation

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