Push or pull? Performance pay, incentives, and information

Yu Chen and David Rietzke ()

No 127987900, Working Papers from Lancaster University Management School, Economics Department

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.

Keywords: Pay for Performance; Moral Hazard; Adverse Selection; Observable Action; Principal-Agent Problem; Grants; Prizes (search for similar items in EconPapers)
JEL-codes: D82 D86 O31 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-cta, nep-hme, nep-mic and nep-ppm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.lancaster.ac.uk/media/lancaster-univers ... casterWP2016_015.pdf (application/pdf)

Related works:
Journal Article: Push or pull? Performance‐pay, incentives, and information (2020)
Working Paper: Push or Pull? Performance-Pay, Incentives, and Information (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:lan:wpaper:127987900

Access Statistics for this paper

More papers in Working Papers from Lancaster University Management School, Economics Department Contact information at EDIRC.
Bibliographic data for series maintained by Giorgio Motta ().