Push or pull? Performance pay, incentives, and information

Chen, Yu and Rietzke, David Michael (2016) Push or pull? Performance pay, incentives, and information. Working Paper. Lancaster University, Department of Economics, Lancaster.

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Abstract

We study a principal-agent model wherein the agent is better informed of the prospects of the project, and the project requires both an observable and unobservable input. We show (1) Performance pay may not be optimal, even if output is the only informative signal of an essential input; (2) Total surplus tends to be higher if one input is unobservable than if both inputs are observable; and (3) Bunching may arise amongst low and intermediate types. We explore the implications for push and pull programs used to encourage R&D activity, but our results have applications beyond this context.

Item Type:
Monograph (Working Paper)
Subjects:
ID Code:
81505
Deposited By:
Deposited On:
16 Sep 2016 14:00
Refereed?:
No
Published?:
Published
Last Modified:
26 Sep 2020 00:21