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A non-parametric revealed preference test of optimal intra-firm resource allocation
[journal article]
Abstract The collective rationality hypothesis initiated by Chiappori (1988) and applied by Seaton (1997, 2001) for a two-person household is used to distinguish the organizational behaviour of firms. Firms produce satisfaction to groups as traditional managerial and early behavioural theories of the firm of... view more
The collective rationality hypothesis initiated by Chiappori (1988) and applied by Seaton (1997, 2001) for a two-person household is used to distinguish the organizational behaviour of firms. Firms produce satisfaction to groups as traditional managerial and early behavioural theories of the firm of Williamson, Baumol and Marris suggest, as well as more modern principle-agent models. Under certain conditions intra firm bargaining leads to a Pareto optimal outcome. What makes this work an important contribution is that it identifies a set of non-vacuous testable restrictions to empirically detect if firm level data satisfy Pareto optimal behaviour for the main decision makers in the organization.... view less
Classification
Economic Statistics, Econometrics, Business Informatics
Management Science
Document language
English
Publication Year
2009
Page/Pages
p. 3463-3476
Journal
Applied Economics, 41 (2009) 27
DOI
https://doi.org/10.1080/00036840701537836
Status
Postprint; peer reviewed
Licence
PEER Licence Agreement (applicable only to documents from PEER project)