An Economic Analysis of the Peter and Dilbert Principles
|Author(s):||Joao Ricardo Faria|
|Date of publication:||January 2000|
|Working paper number:||101|
The paper discusses how the Peter and Dilbert Principles can occur and what are the consequences for a profit maximizing firm. A competence frontier is constructed as a linear combination of the maximum levels of technical and social skills that are difficult to measure and evaluate. The Peter Principle holds when managers are chosen from workers that are in the competence frontier and the Dilbert Principle when they are below the competence frontier. It is shown that the profitability under the Dilbert Principle is less than under the Peter Principle. The introduction of new technologies is one form to avoid the Dilbert Principle.
|Paper:||Download (Format: PDF, Size: 111 Kb)|
Ang, J., Cole, R. and Lawson, D., 2010, "The Role of Owner in Capital Structure Decisions: An Analysis of Single-Owner Corporations", Journal of Entrepreneurial Finance, 14(3), 1-36.
Axelson, U. and Bond, P., 2011, "Investment Banking Careers: An Equilibrium Theory of Overpaid Jobs", Discussion Paper: 690, Financial Markets Group, London School of Economics.
Axelson, U. and Bond, P., 2011, "Wall Street Occupations: An Equilibrium Theory of Overpaid Jobs", Working Paper, London School of Economics.
Brilon, S., 2010, "Job Assignment with Multivariate Skills", Working Paper, Max Planck Institute for Research on Collective Goods.
Dilger, A., 2003, "Lazear’s Stochastic Interpretation of the Peter Principle: An Empirical Examination based on NBA-Data", Working Paper: 2003-07, Department of Organization and Planning, University of Vienna.
Gavilan, A., 2012, "Wage Inequality, Segregation by Skill and the Price of Capital in an Assignment Model", European Economic Review, 56(1), 116-137.
Knapp, K., , "Examining The Dilbert Principle", Working Paper.
Koch, A. K. and Nafziger, J., 2012. "Job Assignments Under Moral Hazard: The Peter Principle Revisited", Journal of Economics and Management Strategy, 21(4), 1029-1059.
Lazear, E. P., 2001, "The Peter Principle: Promotions and Declining Productivity", NBER Working Paper: 8094, National Bureau of Economic Research.
Nafziger, J., 2007, Information and Incentives in Organizations, Thesis.
Savych, B., 2005, Toward Incentives for Military Transformation: A Review of Economic Models of Compensation, Technical Report, Rand Corporation.
Schaap, J. I. and Ogulnick, S., ,"The Peter Principle: Is This Forty-Year-Old Universal Phenomenon in Decline or Growing?", Working Paper.
Schöttner, A. and Thiele, V., 2010, "Promotion Tournaments and Individual Performance Pay", Journal of Economics and Management Strategy, 19(3), 699-731.
Sobkowicz, P., 2010, "Dilbert-Peter Model of Organization Effectiveness: Computer Simulations", Journal of Artiﬁcial Societies and Social Simulation, 13(4).
Tsoulouhas, T., Knoeber, C. and Agrawal, A., 2007, "Contests to Become CEO: Incentives, Selection and Handicaps", Economic Theory, 30(2), 195-221.