A BEJTE Contributions article.

Abstract

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.

Submitted: April 22, 2007 · Accepted: August 31, 2007 · Published: September 15, 2007

Recommended Citation

Banerjee, Priyodorshi (2007) "Collective Punishments: Incentives and Examinations in Organisations," The B.E. Journal of Theoretical Economics: Vol. 7 : Iss. 1 (Contributions), Article 34.
Available at: http://www.bepress.com/bejte/vol7/iss1/art34