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Internalizing Team Production Externalities through Delegation: The British Passenger Rail Sector as an Example
Author(s) -
HORTALAVALLVE RAFAEL,
SANCHEZ VILLALBA MIGUEL
Publication year - 2010
Publication title -
economica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.532
H-Index - 65
eISSN - 1468-0335
pISSN - 0013-0427
DOI - 10.1111/j.1468-0335.2009.00787.x
Subject(s) - delegation , externality , incentive , hierarchy , production (economics) , industrial organization , business , microeconomics , economics , market economy , management
We show that in situations of team production, the associated externality between workers can be partially internalized via the delegation of authority of contracting rights, thus improving the overall efficiency of organizations. A delegated structure provides further incentives to individuals in higher tiers of the hierarchy because it makes them residual claimants. Our model sheds light on recent debates about the organization of the British passenger rail sector.