Luis Garicano

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This paper asks how well different organizational structures perform in terms of generating information about investment projects and allocating capital to these projects. A decentralized approach—with small, single-manager firms—is most likely to be attractive when information about projects is “soft” and cannot be credibly transmitted. In contrast, large(More)
This paper studies how communication allows for the specialized acquisition of knowledge. It shows that a knowledge-based hierarchy is a natural way to organize the acquisition of knowledge when matching problems with those who know how to solve them is costly. In such an organization, production workers acquire knowledge about the most common or easiest(More)
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How do rational firms respond to consumer biases? In this paper, we analyze the profitmaximizing contract design of firms if consumers have time-inconsistent preferences and are partially naive about it. We consider markets for two types of goods: goods with immediate costs and delayed benefits (investment goods) such as health club attendance, and goods(More)
We present an equilibrium theory of the organization of work in an economy where knowledge is an essential input in production and agents are heterogeneous in skill. Agents organize production by matching with others in knowledge hierarchies designed to use and communicate their knowledge efficiently. Relative to autarky, organization leads to larger(More)
This paper examines how the degree of competition among firms in an industry affects the optimal incentives that firms provide to their managers. A central assumption is that there is free entry and exit in the industry, which implies that changes in the nature of competition lead to changes in the equilibrium market structure. The main result is that as(More)
Empirical studies on information communication technologies (ICT) typically aggregate the “information” and “communication” components together. We show theoretically and empirically that these have very different effects on the empowerment of employees, and by extension on wage inequality. If managerial hierarchies are devices to acquire and transmit(More)
This paper is concerned with the effect of nonmonetary incentives on behavior, in particular with the study of social pressure as a determinant of corruption. We offer empirical evidence that shows how professional soccer referees favor home teams in order to satisfy the crowds in the stadium. Referees have discretion over the addition of extra time at the(More)
Very few business topics attract as much public attention as the paychecks of top executive officers in the largest U.S. companies. Undoubtedly, part of this interest has been fueled by the large and continuous increases in chief executive officers’ (CEOs) compensation over the past three decades. Even ignoring the more recent escalation in the use of(More)