Incentive Design and Mis-Allocated Effort

Wendelin Schnedler

VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order from Verein für Socialpolitik / German Economic Association

Abstract: Incentives often distort behavior: they induce agents to exert effort but this effort is not employed optimally. This paper proposes a theory of incentive design allowing for such distorted behavior. At the heart of the theory is a trade-off between getting the agent to exert effort and ensuring that this effort is used well. The theory covers various moral-hazard models, ranging from traditional single-task to multi-task models. It also provides -for the first time- a formalization and proofs for various widely-spread perceived wisdoms about incentive design and distorted behavior.

JEL-codes: D86 J33 M52 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-cta, nep-hrm and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc13:79775

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