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Screening budgets


Miller, Nolan; Zeckhauser, Richard; Wagner, Alexander F (2006). Screening budgets. Journal of Economic Behavior & Organization, 63(3):351-374.

Abstract

How should an organization’s center allocate resources to units under its control which are better informed? Even with conscientious productivity reviews, important information will remain asymmetrically held. If units value their own expenditures more than those of their peers, they will seek excess budgets and expenditures. Fortunately, budget authorities can infer productivities from units’ expenditure patterns across spending categories and over time. Optimal screening budgets reward more productive units with greater overall budgets. Such screening provides significant welfare gains over traditional fixed or reallocable budgets. Empirical results for a large electricity and infrastructure provider fit an important version of the model.

Abstract

How should an organization’s center allocate resources to units under its control which are better informed? Even with conscientious productivity reviews, important information will remain asymmetrically held. If units value their own expenditures more than those of their peers, they will seek excess budgets and expenditures. Fortunately, budget authorities can infer productivities from units’ expenditure patterns across spending categories and over time. Optimal screening budgets reward more productive units with greater overall budgets. Such screening provides significant welfare gains over traditional fixed or reallocable budgets. Empirical results for a large electricity and infrastructure provider fit an important version of the model.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Language:English
Date:2006
Deposited On:30 Apr 2014 16:10
Last Modified:24 Sep 2019 20:17
Publisher:Elsevier
ISSN:0167-2681
OA Status:Closed
Free access at:Related URL. An embargo period may apply.
Publisher DOI:https://doi.org/10.1016/j.jebo.2004.12.004
Related URLs:https://www.sciencedirect.com/science/article/pii/S0167268105001861 (Publisher)
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=906788
Other Identification Number:merlin-id:3467

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