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The Organization of Production: Moral Hazard and R&D


Polk, Charles William (1993) The Organization of Production: Moral Hazard and R&D. Dissertation (Ph.D.), California Institute of Technology. doi:10.7907/y956-qt38.


We model technical innovation of a final good at the subcomponent level. Research and Development efforts are undertaken on subcomponents, incrementally enhancing the technological inputs to the final good. Through observation of actual R and D procurements, we identify the principal and agents appropriate for such innovation. Two categories of agent, the conventional profit seeking agent and a performance seeking agent, are identified. A principal who jointly values the capabilities of the subcomponent undergoing R and D and the funds available for purchasing other subcomponents to the final good is identified. The principal does not have a transferable utility function. We characterize optimal R and D production organization between such a principal and each type of agent. In addition to the importance of the information environment between principal and agent, the motivational properties of the principal and agent significantly affect the form and existence of optimal R and D procurement. We draw insights for both private and public sector industrial organization.

Item Type:Thesis (Dissertation (Ph.D.))
Subject Keywords:Social sciences
Degree Grantor:California Institute of Technology
Division:Humanities and Social Sciences
Major Option:Social Science
Thesis Availability:Public (worldwide access)
Research Advisor(s):
  • Ledyard, John O.
Thesis Committee:
  • Unknown, Unknown
Defense Date:18 May 1993
Record Number:CaltechTHESIS:01022013-113303956
Persistent URL:
Default Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:7359
Deposited On:02 Jan 2013 20:27
Last Modified:16 Apr 2021 23:12

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